Rabobank - "EUR/USD: A weaker euro would be supportive for growth in peripheral Europe.
However, not all currencies can be simultaneously weak and the EUR is losing the battle. Insofar as the market remains obsessed with the timing of Fed tapering, threats of further policy action from the ECB are proving to have limited power over the direction of EUR/USD. Not only that, but the strength of Germany’s external sector and current account remains a source of strength for the EUR. The eurozone as a
whole recorded a EUR 14bn current account surplus in September which will continue to contribute to the resilience of the currency.
Although the Fed did not rule out tapering in December in its October policy meeting, we suspect that the Fed will remain on hold until March and that the USD will take its time in clawing itself back to stronger levels. This implies that the ECB will have little choice but to retain its dovish threats. Even so we expect that EUR/USD will remain well supported at least into year end and most likely until it is clear that the Fed are on the brink of tapering. We see risk of EUR/USD holding above the 1.30 area until H2 next year."