The economists of Credit Agricole anticipate that the pair EUR/USD stays in a limit range for four reasons.
Uncertain timing of Fed dovish turn
The Fed’s turn to a more dovish stance remains uncertain, and this ambiguity could keep the USD supportive in the coming months. Until there is a clear signal from the Fed, the USD strength could continue.
Fed spike followed by ECB spike
If the Fed peaks, the ECB will soon follow suit. This would limit any significant widening of the EUR/USD rate spread, limiting the upside potential of the EUR/USD pair.
Possible economic recession in the US in the fourth quarter of 2023
A US economic downturn in the fourth quarter of 2023 could contribute to global cyclical headwinds. This situation could further complicate the currency dynamics between the EUR and the USD.
Temporarily exceeding growth in the Eurozone
Any growth surpluses in the Eurozone relative to the US could only be temporary. If this occurs, the momentary strength in the Euro could fade soon, keeping the EUR/USD pair range bound.
Source: Fx Street
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