SEB on the euro
SEB FX Strategy Research doesn't have a strong conviction on EUR/USD around current levels and argues that investors need to be humble and admit the near-term moves in EUR/USD could go in any direction.
"On the one hand we still think that expectations on relative monetary policy remain the key driver for currencies in general and EUR/USD in particular. Given our view of further rate hikes by the Fed (the next one in December), while the ECB probably will deliver a soft message at the meeting next week not to provoke further euro strength, which could slow down the recovery and depress already low inflation, the upside potential in EUR/USD should be limited.
At the end of the day, the outlook for the dollar will probably be a battle between these two opposing forces with some additional uncertainty from the unusual correlation between the dollar and changes in the global risk sentiment," SEB argues.
"Although uncertainty in the short term is substantial we maintain the view communicated earlier that EUR/USD should be close to a peak. The currency pair has moved beyond what seems reasonable, and a renewed focus on central bank policy should support the dollar towards our year-end EUR/USD forecast of 1.14," SEB concludes.
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