EUR/USD has broken through parity. However, the Economists at Nordea expect the dollar’s weakness to be only temporary and forecast the world’s most popular currency pair to trade at 0.93 by the end of the year..
The markets will once again receive a jug of cold water from the Fed at its November meeting
“The Fed will need to see clear signs of weaker wage growth before it is satisfied and we struggle to see that will be the case with this week’s data, when the US labor market remains very tight. So , the dollar weakness we see today could end up being short-lived if the Cost of Employment Index shows high wage growth, which in turn should push rates higher and values lower again.”
“We expect a 75 basis point rate hike from the Fed next week, and 50 basis point hikes in December 2022 and February 2023.”
“The latest weather forecasts show mild weather for some time. Although this will offer much-needed relief to the eurozone, the energy crisis is far from over. The weather will eventually turn colder, forcing companies to resort to gas storages. Political and fragmentation risks remain, and we think the ECB will struggle to raise rates as much as markets expect. In addition, the expected rate hikes have drawn criticism from Italy’s new Prime Minister. All of this makes us continue to doubt the euro for the time to come”.
“We see EUR/USD at 0.93 towards the end of the year.”
Source: Fx Street
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