FX.co ★ Euro could surprise investors in 2020

According to a number of experts, the euro could surprise traders next year, having demonstrated rather strong dynamics.

Experts cite fiscal stimulus in the European Union, increasing criticism of the European Central Bank's negative interest rate policy and potential growth in volatility, which cast doubt on the effectiveness of using EUR as a financing currency for carry trade operations as factors that will strengthen the euro.

According to the consensus forecast of economists recently surveyed by Bloomberg, the euro will rise in price against the US dollar to $1.12 by the end of March, and to $ 1.16 by the end of 2020.

In particular, Morgan Stanley expects EUR/USD to rise to 1.16 in the first quarter.

ABN Amro Bank and Commerzbank expect the euro to rise to $1.14 by the end of March, given the stabilization of the European economy and the disappearance of uncertainty around Brexit.

The single European currency will decrease against the US dollar to $1.10 in the next three months, but then will strengthen to $1.15 within 12 months, according to Goldman Sachs.

"In the near future, the euro may continue to fall, even if the subsequent main movement involves its strengthening," said Zak Pandl, bank strategist.

"The fundamental picture should become more positive for the euro before we see the growth of its exchange rate, but this statistical data has not yet shown. However, given the position, the single currency's next long-term movement is likely to be growth," he added.

The expert also noted the significance of the forecast for improving global growth.

"If such a forecast turns out to be true, then the strengthening of the euro in relation to its competitors in the Big Ten will be the highlight of next year," said Pandl.

Regarding short-term prospects, according to John Hardy, a strategist at Saxo Bank, for the EUR/USD pair, which recently showed antirecords of expected volatility, the outcome of trade negotiations between the US and China may be much more important than the upcoming Federal Reserve and ECB meetings.

"The entry into force of US duties on Chinese imports on December 15 will be a negative moment for the euro, since the EU is most dependent on exports to China. From a technical point of view, the first sign of a transition to decline will be a failure below 1.1000, while the bulls really need a confident exit above 1.1180," says J. Hardy.