Euro Still In Favor, But Downside Risks Prevail: Reuters Poll | 3/20/2019 | Staff
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BENGALURU (Reuters) – The euro will rebound from its worst start to a year since 2015 to gain over the coming 12 months, according to a Reuters poll of analysts, although they warned that risks to that view were skewed to the downside.

Having lost nearly 4.5 percent against the dollar in 2018, the euro has not fared any better so far this year, falling more than 2 percent in January-March — its worst first-quarter performance in four years.

Growth - Inflation - Prospects - Region - Central

That was mostly driven by weak growth and inflation prospects for the region, which pushed the European Central Bank to rule out any rate hikes this year and announce new long-term cheap loans, known as TLTROs.

But the poll of more than 75 currency analysts taken this week showed the euro will reverse that trend and gain about 5 percent in a year, to $1.18 from around $1.12 on Thursday.

Currency - Start - April - News - Talks

The single currency began to rise at the start of April on news that talks on trade between the United States and China appeared to be making headway.

“While Europe remains impacted by external trade concerns, assuming an easing in China-U.S. trade tensions into H2 and a resulting turn in external data, we look for a stronger medium-run euro profile,” said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.

Introduction - TLTROs - Cliff - Funding - Costs

“The introduction of fresh TLTROs helps to alleviate a potential cliff in funding costs for euro zone banks, while increased fiscal stimulus will also be supportive for the euro.”

Economic data out of the euro zone in recent weeks has given few reasons to be optimistic, but the U.S. economy is also experiencing a slowdown, which has forced the Federal Reserve to make a U-turn on policy.

Fed - Dot - Plot - Projections - Hikes

The Fed’s “dot plot” projections now suggest no hikes in 2019 compared with two predicted in December, with economists in...
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