EUR/USD: 1Q17 to mark peak pessimism - ING

Research Team at ING suggests that the US Treasury yields point to a cautious dollar advance through 2017, interrupted by a reality check from Congress in the summer and presumably some negative dollar remarks from the White House at some stage. 

Key Quotes

“At the same time the political risk premium in the EUR is unlikely to dissolve until 2Q17 at the earliest – on the assumption that Le Pen does not beat Fillon to the French Presidency. We judge 1Q17 for peak pessimism in EUR/USD, which could see levels very close to parity. However, at that point, EUR/USD will be around 15% undervalued and assuming: (1) Fillon wins; and (2) the ECB announces tapering in June 2017, EUR/USD should recover some ground into year-end.”