EUR/USD: Brighter outlook, forecast at 1.11 by mid-year then recovering to 1.15 – Rabobank

In addition to the  European Central Bank's (ECB) recent hawkish pivot, economists at Rabobank see positioning as supporting the EUR’s recovery. However, this does not mean that the shared currency is guaranteed to have an easy ride in the coming months. 

EUR/USD seen at 1.15 on a one-year view

“We think the market has priced in too much ECB tightening on a one-ear view and see the EUR as vulnerable in the coming weeks if money market rates backtrack.” 

“The weight of long USD positions is likely to continue limiting the USD’s upside potential in the coming months. That said, given that the US’s inflationary cycle is so much further developed than that of the Eurozone, we don’t see the USD’s bull run as being over yet.”

“Previously, we were forecasting that EUR/USD would drop to 1.10 by mid-year as the Fed’s tightening commenced. In light of the ECB’s hawkish tilt, we have revised this forecast up moderately to 1.11 and brought forward our medium-term projections for the EUR’s recovery. We now forecast EUR/USD at 1.15 on a one-year view from a previous forecast of 1.12.”