EUR/USD: TD Securities lowers its bullish euro targets for 2019

Reflecting the global trend towards more conservative central bank interest rate hikes, we are revising our expectations for ECB rate hikes to the downside, with a single 15-basis point increase over the December deposit rate, note TD Securities analysts.

"We expect the ECB to move at a cautious pace, with hikes of 25 bps every six months thereafter. We don't believe that the ECB will implement TLTROs if macroeconomic data recovers as expected.

Rates: Taking into account the evolution of our ECB rate forecasts, we are revising our forecasts for the Bund to 2019. We now expect the 10-year Bunds to end in 2019 at 55 basis points instread of the 70 points previously expected.

"Forex: We are revising our EUR/USD forecast to the downside based on our lower ECB forecasts. We retain a generally constructive outlook for the pair, but we are reducing our expectations for the end of the year to 1.24 versus 1.27. Short-term risks in our opinion are still biased to the downside, but we could see upside risks emerge in the longer term."