JP Morgan (JPM) analysts expect the EUR/USD pair to average 0.9500 during the first half of next year (2023), while citing the possibility of a test towards 0.9000 (assuming there is no de-escalation in geopolitics).
The investment bank also mentioned in its latest report that its economists they expect the US Federal Reserve (Fed) and the European Central Bank (ECB) to pause in the first quarter of 2023 at 5% and 2.5% for the rest of 2023.
This will leave the interest rate differential just 50 basis points (bp) from its 15-year low.
“The outlook calls for a slight recession in the US at the end of 2023, which should hinder the recovery in the Eurozone (EU is expected to grow 0.2% vs. US 0.4% next year,” JPM notes in the report.
JP Morgan also mentioned that a Fed pause is not a sufficient condition for a rebound in EUR/USDwhile adding: “The trade strategy is tactical, with the risks of a continued improvement in the momentum of regional growth or a potential cessation of hostilities.”
Source: Fx Street