ING FX Strategy Research discusses the EUR outlook and thinks that the pair is set for a stab towards 1.25 over the coming weeks in Q1.
"The EUR has started the new year pretty much where it left off – on the up and not shy of any positive catalysts.
These positive factors underpin our view for EUR/USD to move up to 1.25 in 2Q18. However, ahead of this, we do look for stability – not least because of a realization that a sharp rally beyond 1.25 in 1Q18 would test the ECB’s ‘pain threshold’ and elicit a relatively dovish reaction from the central bank.
A reality check on EZ inflation data and Italian elections may implicitly help the ECB’s cause by holding EUR bulls at bay in 1Q18.
But EUR/USD making a charge towards 1.25 is merely a matter of time," ING argues.