After the ECB meeting, EUR/USD experienced a decline, reaching around the 1.0850 level, following the central bank’s relatively dovish stance. Analysts at Danske Bank assess the currency pair’s future prospects.

In the short term, Danske Bank suggests a strategy of selling EUR/USD on rallies. Despite acknowledging their forecasts for the Federal Reserve (expecting the first cut in March) and the European Central Bank (anticipating the first cut in June), the analysts believe that the broader pricing dynamics in the G10 currencies might play a more pivotal role for the cross. They express a perception that current market expectations for rate cuts are overly optimistic.

Maintaining a bearish stance, Danske Bank continues to favor selling EUR/USD on upward movements in the near term. Their projections indicate a target range of 1.0700 to 1.0500 for EUR/USD over a 6 to 12-month horizon.