Société Générale economists analyze the outlook for the Euro for 2024.
Another lower cyclical high for EUR/USD?
In 2024, we expect the Euro to weaken against the Japanese Yen and Scandinavian currencies, and only post incremental gains against the underappreciated British Pound.
We only forecast modest growth, with GDP increases of 0.8% in 2024 and 1.1% in 2025, but this should be enough for EUR/USD to rise.
Relative short-term rates are returning to favor the Euro, thanks to a market rethink on the outlook for the Fed's monetary policy as growth slows and inflation falls. Our forecasts for the 2-year rate differential point to it narrowing below 1% over the next year, where it was trading in 2021. However, we do not expect EUR/USD to return to the levels it reached then, given the obstacles to growth that the Eurozone still faces.
EUR/USD:
- First quarter of 2024: 1.10
- Second quarter of 2024: 1.12
- Third quarter of 2024: 1.14
- Fourth quarter of 2024: 1.16
Source: Fx Street
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