Danske Bank: euro exchange rate will soon return to 1.20 per dollar

Currency strategists at Danske Bank comment on the outcome of yesterday’s meeting of the FOMC. The market interpretation of the FOMC instruction led to an increase in the yield of US Treasury bonds and a fall in the EUR / USD exchange rate (EURUSD) below the level of 1.1900. Now, the futures market for the federal funds rate estimates the likelihood of a December Fed rate hike above 60%. This should limit the degree of support for the dollar from the approaching tightening of monetary policy, the bank believes. The downward movement in the euro / dollar should be short-lived and not very deep. Danske Bank expects that prices will soon rise again to the level of 1.2000.

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