EUR/USD: extensive fundamental analysis of the pair for November 2017 (Lloyds Bank)

Lloyds Bank shares its fundamental analysis of the EUR/USD for the month of November.

"Since the peak of September, the EUR/USD has continued its modest correction. The pair briefly fell below 1.16, after peaking at 1.2092.

Recent moves largely reflect a combination of a further strengthening of the dollar and the ECB's "dovish" announcement in October.

Underlying US economic activity remains robust and the labour market continues to strengthen. In particular, the unemployment rate fell to 4.1%, the lowest level since 2000. We believe that the Fed will raise rates to 1.5% in December, with three new increases in 2018.

The ECB has announced a reduction of its monthly security purchases to €30bn from January to September. They avoided setting an explicit end date because price pressures remain modest.

We expect a gradual rise of the euro by the end of 2018, supported by expectations that the ECB will further reduce its asset purchases after September next year.

A key risk is the US tax reform, which could boost the dollar if Congress votes an agreement.

Our target for the EUR/USD is 1.22 by the end of 2018 and 1.26 by the end of 2019."