Euro Outlook: Unicredit

Tonight, the FOMC meeting outcome will also be the major event for the FX market. However, investors have already anticipated the likely change in the Fed's rhetoric to drop the word "patience" from its statement.

Unicredit notes its views as follows:

• We are skeptical that the move alone - although signaling that the start of interest rate normalization in the US is getting closer (we expect it to occur in June) - will heavily impact EUR-USD. 
  
  
• From a fundamental perspective, since the US reported very strong job gains at the beginning of the month, the markets bid the dollar and we think by now such a change in language is pretty much priced in. 
  
  
• In addition, over the past couple of days divergent data between the EMU and the US (in the EMU's favor) has seemed to provide some modest support to the euro, in sharp contrast to previous developments when good euro area data were completely ignored by the market. 
  
  
• All that being said, we should not forget that USD momentum remains pretty strong across the board, so risks in the short-term (over the next few weeks) remain to the downside for the euro. 
  
  
• Medium-term, we stick to the view that EUR-USD is likely to benefit somewhat from broader evidence of the eurozone economic recovery and stronger portfolio flows into EU stocks. Hence: we keep our EUR-USD target at 1.08 for 4Q15.