Standard Chartered sees euro strengthening to 1.14, but warns of impact from US assets

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Standard Chartered* expects the euro to strengthen to 1.14, supported by stable policy from the European Central Bank (ECB) and improving economic sentiment in Germany.

However, the bank warns that a potential return of investors to US assets could limit the single currency's growth.

In a note to clients, Standard Chartered stressed that the euro's performance remains closely linked to both the US dollar and domestic macroeconomic indicators in Europe.

Positive factors supporting the euro:

  • Improved economic sentiment in Germany:A stronger-than-expected May IFO business climate index in Germany indicates a recovery in business activity. In addition, the prospect of fiscal stimulus from Berlin is also supporting the euro.
  • Stable eCB Policy:Standard Chartered forecasts the ECB will cut interest rates by 25 basis points next week before taking a pause until the end of the year. The bank believes this moderate policy should support the euro as it signals a prudent approach to monetary policy.

Potential risks limiting euro growth:

  • Return to uS Assets:Standard Chartered warns that any short-term shift in investment interest towards US assets could offset positive factors supporting the euro. The strengthening of the US dollar caused by this shift could put pressure on the EUR/USD pair and keep it in the current range.

Technical analysis:

From a technical point of view, the EUR/USD pair is showing resilience, holding steady above the 50-day moving average. This indicates the presence of an upward trend, which can support further strengthening of the euro if there are no significant negative factors.

Conclusion:

Standard Chartered видит потенциал для укрепления евро до уровня 1,14, опираясь на улучшение экономических настроений в Германии и ожидаемую стабильную политику ЕЦБ. Однако, банк подчеркивает, что динамика курса евро будет зависеть от многих факторов, включая колебания доллара США и потенциальный возврат инвесторов к активам США. Инвесторам следует внимательно следить за этими факторами, чтобы принимать обоснованные решения относительно своих позиций по паре EUR/USD.

*Standard chartered Is a multinational corporation providing financial services, mainly through a subsidiaryStandard CharteredBank.

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