The EUR/USD Pair May End Up at 1.15 by Year End, Say Nomura

The EUR/USD pair, which is currently trading in the 1.06s will eventually rise to 1.15 once near term once downside drivers have passed, say Nomura.

The pair gained momentum higher recently following the ECB press conference at which the ECB president Draghi said that risks were now more balanced.

“In that regard, Nomura Research notes that President Draghi communicated that the Bank had removed the reference to using all instruments to signal that the sense of urgency is gone, and as the ECB’s risk assessment has likely become more balanced, these communications supported EUR for now,” said a note on Efxnews.

On the horizon are some major events which risk pushing the pair lower, such as the French Presidential election as well as the next few Fed meetings.

“French elections and the Fed policy stance will likely be more important drivers of EUR/USD, as they pose near-term downside risks,” said Nomura,

After that, however, and Nomura expects the EUR to benefit from reflation in the medium term and target 1.15 for EUR/USD by year-end.

The ECB upgraded its forecasts for inflation in the Eurozone considerably at its March meeting, however, these upgrades have been challenged by some analysts.

One notable critic has been Danske Bank, who argue the Unemployment Rate is still too high in the Eurozone to expect wages to rise significantly and therefore inflation.

They say Core inflation is only likely to begin rising when the Unemployment rate falls to below 8.9%, and even then there is no guarantee it will, since germany and Japan are both exmaples of countries where wages remain stubbornly low despite low jobless rates.