Dollar hits new three-year low
The dollar index, which measures the US currency against a basket of other major currencies, has hit a new three-year low today of 90.331.
Analysts at Bank of America Merrill Lynch believe the dollar will recover some ground against the euro in the coming months.
Support for EUR/USD from forward rate divergence may be peaking whilst markets look ahead to the European Central Bank meeting and any commentary on the euro from European Central Bank president Mario Draghi.
EUR/USD could be vulnerable from a dovish Draghi.
The USD has sharply weakened as a result of the recent wave of global central bank repricing, despite strong US data. EUR/USD appreciation has been supported by relative interest rate expectations, however upside potential looks limited for now. A USD rebound is likely in the first half of 2018, predicated on corporate repatriation flows and vastly underpriced Fed vs ECB expectations.