A further repositioning around expectations from the Federal Reserve is turning out to be a little less beneficial for the dollar, and the European Central Bank (ECB) has beaten aggressive expectations from Deutsche Bank. Consequently, bank analysts forecast EUR/USD at 1.17 by the end of 2022.
EUR/USD has not yet priced in positive rates
“We have recently lowered our EUR/USD forecast, implying a neutral outlook, but with a bias to buy the EUR/USD around 1.10 over the second quarter and a stronger bullish view thereafter (1.17 at the end of the year).
“We see developments in the energy market as the biggest negative for EUR/USD, and high prices are not going away anytime soon.”
“On the other hand, a further repositioning around Fed expectations is turning out to be slightly less beneficial for the dollar, while the ECB has outperformed our (aggressive) expectations And Europe’s fiscal response to offsetting the short-term growth shock looks sizeable.”
“Beyond EUR/USD, our forecasts also point to a high in the dollar in the second quarter followed by the start of a broader downtrend.”
Source: Fx Street
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