June 7, 2018 / 7:33 AM / 5 months ago

BNP Paribas forecasts euro rebound to $1.23, ECB to raise rates twice in 2019

LONDON, June 7 (Reuters) - French lender BNP Paribas said on Thursday it expects the euro to rise more than 4 percent to $1.23 in three months from current levels as the market is underpricing the chances of the European Central Bank tightening monetary policy.

"We argue that, in light of extended EURUSD short positioning and subdued ECB tightening expectations, the eventual rebound in EURUSD will prove substantial (hence an aggressive 1.23 target over three months)," strategists at the bank said in a note.

BNP Paribas also said it expects the ECB to end its massive bond-buying programme at the end of 2018 and to then hike interest rates by 20 basis points each in both June and December of 2019, a far more hawkish call than the market is currently expecting. (Reporting by Tommy Wilkes; Editing by Saikat Chatterjee)

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