EUR/USD moved lower to around the 1.0850 mark after the relatively dovish ECB meeting. Economists at Danskr Bank analyze the pair's outlook.

Selling EUR/USD on rallies in the near term

While we recognise that our Fed (first cut in March) and ECB (first cut in June) forecasts, all else equal, are positive for EUR/USD in H1, we believe that the broader pricing in the G10 could be more decisive for the cross, as we perceive current market expectations for rate cuts to be excessive. 

We still maintain our bias towards selling EUR/USD on rallies in the near term, and we forecast EUR/USD at 1.0700/1.0500 on a 6/12M horizon.