Barclays Capital Research argues that the EUR is now close to a turning point, amid accelerating inflation and stronger economic data, though it still faces many near- and long-term threats.
"A rebound from the excessive pricing of political risk for 2017 introduces upside risks to the EUR in the nearterm. However, an already priced tightening by the ECB in 2018, with risks from a downshift in core inflation expected later this year, and the reacceleration of other economies in more advanced cyclical positions, will challenge the EUR’s relative value," Barclays adds.
Bigger picture, Barclays believes that political risks are likely to weigh on the EUR again in 2018, with many events potentially threatening its very existence such as Italian election and banks, Greek and Portuguese debt.
All in all, Barclays now forecasts EURUSD to depreciate to 1.06 by Q3 17, reaching a bottom in Q4 17 at 1.03, and rebounding to 1.05 by Q1 18.
EUR/USD is trading circa 1.0806 as of writing.
Source: Barclays ResearchOriginal Article
