Downside potential for EUR/USD could prove to be limited – Rabobank

By FXStreet FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, suggests that the December 16 FOMC meeting is the dominant market event and EUR/USD has been well supported in recent weeks suggesting that the market may be priced for a less than hawkish message from the Federal Reserve.

Key Quotes

“For sure talk of a ‘dovish tightening’ from the Fed has received a fair degree of attention in recent weeks. That said, while the market is largely agreed that the Fed will not want to shock
the market or undermine its own credibility by not hiking interest rates, there is far less consensus about the signals the Fed will give about the likely trajectory of rate hikes next year.”

“Surveys suggest that economists’ views are split between 2, 3 and 4 rate hikes in 2016. It is our view that the Fed is set to hike only twice next year. This lack of consensus suggests there is scope for continued, heightened volatility in markets into 2016. Our less hawkish expectation for Fed policy is consistent with our view that parity on EUR/USD may continue to be elusive in the months ahead.”

“We would argue that there are downside risks to the pace of the US recovery …read more

Source:: FX Street