EUR/USD: Keeping a buy on dip mentality – TDS

Next week, the European Central Bank will have its monetary policy meeting. Analysts at TD Securities see a 25 basis points rate hike but do not rule out a 50 bps. Regarding EUR/USD, they see it breaking above 1.10 in the months ahead. 

Key quotes:

“Easing financial system stress, persistent high inflation, strong wage growth, and avoidance of a winter recession are enough for the ECB to comfortably hike rates by 25bps in May with guidance that more tightening is to come. We wouldn't completely rule out a 50bps hike should Tuesday's data surprise significantly.”

“We maintain a buy on dip mentality for EURUSD, expecting a sustained break of 1.10 in the months ahead. The ECB risks skew towards the hawkish end, while other factors in our MRSI overlay framework, like equities, terms of trade, momentum, and inflation remain supportive of EUR outperformance. We continue to see EUR outperforming European peers like NOK, SEK, CHF, and GBP and like scaling back into EURGBP longs towards 0.88.”