Bank of America Merrill Lynch discusses EUR/USD outlook in 2019 from the political headlines perspective and maintains its forecasts at 1.20 by end of Q1 and at 1.25 by year-end.
“While markets in the past year were just trying to get through the US midterm elections of 2018, the 2020 US elections are already driving much market volatility now. From the government shutdown to potential threats to Federal Reserve credibility, candidates are already headed to Iowa, and the 2020 election is motivating much of the political headlines,”BofAML notes.
“In general, our FX forecasts remain the same. Our EUR-USD forecast remains 1.25 for the end of the year, which is a move towards its longer-term equilibrium value, in our view. Many of the USD-positive forces that could help drive USD strength in 2018, such as the tax cut at end-2017, may have diminishing implications for the currency. Corporate repatriations of overseas profits have been slowing down in 2Q and 3Q in 2018 which we had been looking to be USD-supportive,” BofAML argues.