Petr Krpata, a strategist at ING, explained that they see EUR/USD moving to the upside during 2019, on the back of a weaker US dollar, rather than a stronger euro.
Key Quotes:
“As widely expected, the European Central Bank (ECB) delivered no fireworks. Instead, it was a cautious tone and downward revisions to both GDP and CPI forecasts. ECB President Draghi’s “continuing confidence with an increasing caution” take on the outlook ahead summarizes it the best.”
“The cautious ECB is unlikely to be a big driver of projected EUR gains next year and is unlikely to be the catalyst for a sharp EUR/USD rally – as for example was the case back in 2017 when the mix of improving Eurozone growth outlook and expectations of ECB quantitative easing tapering translated into a meaningful EUR rally.”
“We look for higher EUR/USD in 2H19 (targeting 1.20 by end-2019) but this will be more about the weak USD (as we expect the dollar bull cycle to peak) rather than a strong EUR. The euro simply lacks domestic catalysts for a more meaningful rally. The expected 40 basis points of ECB depo hikes (between end-2019 and early 2020) are unlikely to do the trick.”
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