Euro

Euro-dollar may have seen its low: Expert

Prospects for the euro are looking up, with some financial experts forecasting the single currency will recover from its five-year slump.

The euro has struggled against the dollar in the last five years, losing lost around 19 percent of its value to the greenback.

However, Vincent Chaigneau, head of rates and FX strategy at Société Générale, reckons the euro-dollar trade may have seen its low point.

"All of the central banks are on the move. The BOJ (Bank of Japan and ECB (European Central Bank) used to be very dovish, less so now," he told CNBC's Street Signs on Wednesday.

"Clearly, the ECB, in particular, is getting much more upbeat about growth and I think, if we have no accidents with the French election, the balance of risk will shift to neutral and we think we get taper too in the autumn, so euro-dollar actually might have seen the low."

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A UBS note published a similar sentiment on Monday.

In a macro strategy report, UBS strategists praised the euro for its resilience.

"Despite recently rising U.S. and European yields as well as GBP (sterling) weakness, the euro held up well last week," the note said.

"A friendly outcome in the French elections and a clearer hawkish shift from the ECB (likely in H2) would boost the euro; until then, we expect it to be range bound and European rate curves to further steepen."

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Deutsche Bank has also eased its bearish outlook for the euro, taking a neutral stance and forecasting a possible rise to $1.10 in the next few months.

George Saravelos, a Deutsche Bank strategist, gave a few reasons for this stance. On one side, several interest rate hikes by the Federal Reserve have already been priced into the dollar, while dollar-positive tax reform is looking unlikely in the short term while U.S. lawmakers grapples with healthcare reform.

Meanwhile, signals from the ECB look set to help the euro.

"Mario Draghi last week signalled a willingness to incrementally turn more hawkish," Saravelos said in a forex report published Wednesday.

Deutsche Bank has revised its second- and third-quarter forecasts upwards for euro-dollar to $1.08 and $1.03. Long term, however, the bank forecasts the euro falling to 95 cents by the end of the year.

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