Barclays Capital Research discusses EUR/USD outlook in light of revising its forecasts higher, as it now sees a flat profile for the pair around 1.22 through 2018.
"A strengthening euro area economy and ECB exit speculation are further front-loading EUR strength. While there are signs the EUR may have run ahead of fundamentals, we believe this accurately reflects reduced institutional risks and likely will sustain. However, the EUR no longer will benefit from the large short position and political discount it started with in 2017; this year it will be swimming against a rising carry disadvantage and face a political challenge in Italy.
We expect these factors to lead to frontloaded range trading in EURUSD centred on 1.22," Barclays argues.
Source: Barclays Research