ANZ Research has revised its view of near term EUR/USD weakness, and now sees further modest gains towards 1.24 in Q1, 1.25 in Q2, 1.27 in Q3, and 1.28 by year-end.

"The arguments in favour of euro strength are gathering pace as strong momentum in growth and positive political developments have boosted the exchange rate.

The break of last year’s high around 1.2060 is attracting buying interest. The rise in the oil price means that the anticipated sharp drop in euro area inflation early this year may not materialise. Growing hawkish tones from some senior members of the ECB’s Governing Council suggest that deflationary concerns over a stronger exchange rate are receding.

In addition, the ECB’s ability to cap the euro through suggestions of extended QE appear increasingly inappropriate. We have therefore brought forward our profile of moderate euro appreciation later this year. Positive developments in German coalition talks have also had a positive influence on the euro," ANZ argues.

Source: ANZ, eFXnews™Original Article