FXStreet reported Thursday that Rabobank lowered its three-month forecast for the euro against the U.S. dollar to 1.10 from 1.13, citing political risks and other pressures.
FXStreet attributed the reported downgrade to Senior FX Strategist Jane Foley. She pointed to political uncertainty in France and Germany, widening French government bond spreads over German Bunds, higher energy prices and weaker market expectations for an October increase by the European Central Bank.
Foley’s account linked higher long-term euro-area interest rates to tighter monetary conditions and said energy costs could weigh on growth. She also said passage of a French budget this year might offer short-term support, while Rabobank saw “limited scope for a sustained recovery.”
FXStreet published its report at 5:39 a.m. ET (09:39 UTC) Thursday, before the ECB’s scheduled decision. Foley expected the central bank to hold rates, with an increase in December; those were forecasts reported by FXStreet, not an ECB commitment.
The ECB’s previous move was a 25-basis-point increase on Sept. 10, effective Sept. 16. The deposit facility rate became 2.50%, the main refinancing rate 2.65% and the marginal lending rate 2.90%. The ECB said future decisions would depend on incoming data and be made meeting by meeting.
The Federal Reserve held its target range at 3.75% to 4% on Oct. 28, with two committee members favoring a 0.25-percentage-point increase. FXStreet also reported Foley expected a December Fed increase, an outlook rather than a Fed signal.
The euro’s recent weakness amid French political and fiscal risks has featured in earlier EconoTimes coverage. The ECB was scheduled to publish its decision at 9:15 a.m. ET (13:15 UTC) Thursday, followed by a news conference at 9:45 a.m. ET (13:45 UTC).
