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EUR/USD: How Will EUR/USD Diverge From Oil?

Bank of America Merrill Lynch Global Research discusses the FX/oil relationship.

Although intuitively, a stronger USD should be related to lower oil prices, we have seen this positive relationship diminishing over the past few years. We still build our EUR-USD outlook on longer-term valuation metrics, with an expectation that US and China can avert the worst of the trade war,” BofAML notes. 

“Our EUR-USD forecasts and oil forecasts are somewhat divergent, despite how they have often moved together historically. Our EUR-USD forecast for the end of this year is 1.17 and 1.25 for the end of next year, while our commodities team expects oil prices to cool towards the end of 2020. Moreover, the growth of US oil production is often thought to be USD-positive,” BofAML adds. 

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