EUR/USD: Worst Case Risks Have Not Materialized; A Frustrating Backdrop For Bears - TD

TD Research discusses EUR/USD outlook and sees scope for a rebound through the second half of the year, targeting a potential move towards 1.15 in Q3 and 1.18 by year-end.

"The divergence between surveys and hard data continues to puzzle, but the ECB will be focused on inflation and activity data. Here we've not seen "worst case" fears realized. giving some breathing room. Inflation remains the real challenge, and we see little hope of core rising much this year. The ECB is likely to keep its policy arsenal dry next week with just TLTRO details announced," TD argues.

"EURUSD continues to ratchet lower but progress remains slow and dips find buyers. EUR has strengthened on some key crosses, however, painting a more nuanced picture. With the ECB looking to extend its on-hold stance, EUR-positive catalysts are hard to find near-term.

The "worst case" risks have not materialized, however, suggesting a frustrating backdrop for bears. EURUSD may continue its grind lower for now, but we still see scope for a rebound as Q4 approaches," TD adds.