Standard Chartered forecasts Euro rise to $1.18 within 12 months

Standard Chartered predicts the Euro will rise against the US Dollar to a range between $1.17 and $1.18 over the next 12 months. This outlook comes despite short-term pressures stemming from fiscal deficit concerns and political uncertainty in certain European nations, most notably France.

The bank identifies France as the primary source of regional weakness due to rising public debt, widening budget deficits, and political difficulties in implementing fiscal discipline. Consequently, French 10-year government bond yields have exceeded 5%, with political risk premiums expected to rise. In contrast, German bonds may see increased demand as safe-haven assets.

While risks exist regarding fiscal pressures spreading to Italy and Spain, the bank notes no current evidence of a widespread European financial crisis. The Euro's movement is expected to be driven largely by interest rate differentials between the US and Germany. Long-term support for the Euro may come from continued growth in the Eurozone, Germany's multi-year public investment program, and the resilience of the banking sector.