Risks of recession in various regions could stoke fears of a liquidity crunch and support USD demand. Analysts at Rabobank continue to see risk of another test of EUR/USD 1.08 before the currency pair moves higher later in the year.
“In our view demand for the USD is likely to be firm as long as the coronavirus crisis continues and fears of recession build in various parts of the global economy.”
“A rise in recessionary risks around the world is likely to support the JPY and the CHF, which are the established safe-haven currencies. That said, we also see the USD as remaining firm against a broad range of currencies on this scenario as investors attempt to avoid any risk of a liquidity crunch.”
“We see scope for a dip in EUR/USD back towards the 1.08 area on a 1 to 3-month view before a recovery towards the 1.13 area as the effects of the crisis diminish.”