EUR/USD to dip to 1.05 on a three-month view – Rabobank

Dollar has started 2024 on the front foot. Economists at Rabobank analyze EUR/USD outlook for the coming months.

EUR to perform poorly in the months ahead

Despite this year’s adjustment in market pricing, in our view, investors are still too optimistically positioned for Fed rate cuts. The market currently sees scope for a 64 bps reduction in the Fed funds target on a 6-month view. We expect further correction in this outlook and consequently expect the USD to see some support on a 1-to-3-month view.

Additionally, we expect the EUR to perform poorly in the months ahead largely on the back of weakness in the German economy.

We see scope for EUR/USD to dip to 1.05 on a 3-month view before the impact of Fed rate cuts boosts risk appetite and weakens the USD in the second half of the year.