EUR/USD still seen at 1.15 amid prices pressures in Europe – Rabobank

Although the eurozone can boast a strong recovery in Q3, headwinds remain plentiful. Economists at Rabobank would see EUR/USD spikes as a selling opportunity. Their medium-term target stays at 1.15.

Higher gas prices, supply chain disruption and slowing growth in China all pose as headwinds to growth 

“Concerns about slowing growth in China are likely to push their way back to Europe through Germany’s manufacturing sector. Simultaneously, higher energy prices come as a threat to real incomes and demand, given signs that wage inflation remain subdued.”

“Although German elections tends not to be huge market moving events, the end of the Merkel era may mark a significant change in European politics. In addition, France faces a presidential election next year. Some comfort will be taken by investors by the news that the far-right’s Le Pen’s standing has dipped in the polls. However, it currently remains likely that she will be standing against Macron in the run off.”

“It is our expectation that the USD will remain on the front foot supported by both fears of a Fed funds rate hike and from safe-haven demand given the catalogue of headwinds facing higher yielding markets (higher US rates, increase in energy prices, fears of a China slowdown).”

“We would favour selling EUR/USD on corrective upticks and maintain a medium-term target of EUR/USD 1.15.”