Euro likely to appreciate gradually against U.S. dollar in 2018, 2019 – Lloyds Bank

The euro has continued with its modest correction against the U.S. dollar since peaking in September. The euro dropped briefly below 1.16, after reaching an earlier high of 1.2092, noted Lloyds Bank in a research report. The recent moves greatly show a combination of renewed dollar strength and the European Central Bank’s dovish October policy announcement.

Underlying U.S. economic activity continues to be strong and labor market continues to tighten. In particular, the jobless rate dropped to 4.1 percent, the lowest level since 2000. According to Lloyds Bank, the Fed is expected to hike rates to 1.5 percent in December, with three rises in 2018.

The ECB announced a reduction in its monthly bond purchases to EUR 30 billion starting from January unit at least September. They refrained from giving an explicit end date because underlying price pressures remain subdued.

The euro is expected to gradually appreciate in the forecast period, underpinned by expectations that the ECB will wind down its asset purchase program after September 2018, stated Lloyds Bank.

“Our target for EUR/USD is 1.22 at end-2018 and 1.26 at end-2019”, added Lloyds Bank.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bearish at -107.156, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 88.7338. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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