Domestic demand is key for EUR/USD outlook

The slow pace of EUR/USD recovery will continue in coming months. While developments in China pose a downside risk, the links should not be overstated. Domestic demand remains supported by the ECB's easing measures.

Credit growth is still edging higher and with almost half of Euro area member state trade staying within the Euro area's borders, domestic demand is critical for EUR/USD outlook. 

"The slow pace of recovery means it will be a long time before inflationary pressures start to show which should keep EUR/USD cyclically weak near current spot over the duration of forecast horizon", says RBC capital markets.