JP Morgan: what can move EUR?
Analysts at JP Morgan think that EUR/USD is now at its fair value of $1.3300-$1.3400 if one takes into account short-end rate spreads, peripheral spreads and equity volatility. The specialists keep forecasts for the pair unchanged targeting $1.3400 by the end of Q3 and $1.3000 by the year-end.
At the same time, JP Morgan warns that EUR/USD may fall below $1.30 this quarter of the next in one or more of the following happens:
- The Fed brings forward the first tightening to early 2015 due to even lower unemployment.
- September and December 2014 LTROs show takedown around 400B euro.
- The ECB launches QE because LTRO takedown is small or inflation is too low.
On the other hand, there are events which may send EUR/USD towards $1.4000:
- US economy fails to generate any wage or inflation pressure in Q3/Q4, thus impeding any rise in US 2-yr rates from the current 0.4% level.
- The Fed stops tapering due to weak activity or inflation data.
- Deflation in periphery ends, lifting money market rates.