Euro Outlook: Euro-Zone Economic Concerns will Continue
Danske expresses reservations over the Euro-Zone performance after a run of generally disappointing data.
It adds; “We expect this weakness to become more pronounced in H2 as the full impact of the last year’s monetary policy tightening hits the real economy. Overall, we think the US economy will prove more robust compared to the European counterpart in H2.”
A key assumption by Danske Bank has been that financial conditions will tighten. In this context, the bank notes that if there is a sharp drop in core inflation and a more resilient than expected global economy, then financial conditions would ease which would limit dollar support.
An important element in the bank’s analysis is that the Euro is currently overvalued which will tend to sap currency support.
The bank expects that the Euro to Dollar will weaken to 1.03 on a 6–12-month view.
Nevertheless, it adds; “If the energy crisis eases and/or euro area countries return to a regime centred on fiscal rules, there is room to place a higher fair value estimate on EUR/USD.”
Danske expresses reservations over the Euro-Zone performance after a run of generally disappointing data.
It adds; “We expect this weakness to become more pronounced in H2 as the full impact of the last year’s monetary policy tightening hits the real economy. Overall, we think the US economy will prove more robust compared to the European counterpart in H2.”
A key assumption by Danske Bank has been that financial conditions will tighten. In this context, the bank notes that if there is a sharp drop in core inflation and a more resilient than expected global economy, then financial conditions would ease which would limit dollar support.
An important element in the bank’s analysis is that the Euro is currently overvalued which will tend to sap currency support.
The bank expects that the Euro to Dollar will weaken to 1.03 on a 6–12-month view.
Nevertheless, it adds; “If the energy crisis eases and/or euro area countries return to a regime centred on fiscal rules, there is room to place a higher fair value estimate on EUR/USD.”