Euro-Dollar Targeting 1.23: Danske Bank
- Written by: Sam Coventry
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"We continue to see EUR/USD on an upward trajectory."
Danske Bank predicts a renewed rally in the euro‑dollar pairing, forecasting that EUR/USD could test the 1.23 level if divergence in central bank policies intensifies.
The bank argues that sustained U.S. inflation softness and slowing growth will erode the dollar’s yield advantage, opening room for euro upside.
"Elevated U.S. inflation data has likely peaked, and cooler prints will reduce Fed‑fund rate expectations significantly," Danske Bank says in its latest FX outlook update. "We continue to see EUR/USD on an upward trajectory."
Currency analysts at the Scandinavian lender confirm their forecast profile remains above that of the consensus of investment bank researchers. (See where consensus places EUR/USD over the next three, six, nine and 12 months with our exclusive download).
Backing this bullish call on the Eurozone's single currency is the view that the economy is performing well. "In the euro area, the economy showed tentative signs of regaining momentum in July, with PMI data generally exceeding expectations."
This can keep the European Central Bank (ECB) cautious on cutting interest rates further.
The forecasts imply the current period of Dollar consolidation will be temporary, with EUR/USD being capped by 1.17 and trading at 1.1650 at the time of writing.
Danske Bank also sees technical validation if EUR/USD can clear resistance in the 1.17–1.18 zone, which may unleash further momentum toward 1.23.
"Following the broad USD’s strong performance in July, the tide has reversed so far in August amid mounting evidence of a slowing US economy. We remain negative on USD both tactically and strategically, continuing to fade potential rallies," says Danske Bank.
The research identifies that seasonal patterns, traditionally showing euro strength in the autumn, could reinforce the bank’s bullish view.
"Should U.S. retail sales surprise on the downside this month, a break above 1.18 may accelerate," the report adds.
The research report cautions that setbacks to the bullish Euro-Dollar view may come from unexpectedly hawkish comments out of the Fed or signs of renewed eurozone softness.
