EUR Now Unlikely To Trade Above 1.10 This Year Say ING
![](https://investmoneyuk.com/wp-content/uploads/2024/04/eur-usd-3-m.jpg)
![Euro to Dollar Forecast](https://images.exchangerates.org.uk/img/eur-usd-3.jpg)
Foreign exchange analysts at ING have been bearish on the US Dollar over the medium term, but it has been forced to adjust its outlook and no longer forecasts that the Euro to Dollar (EUR/USD) exchange rate will trade above 1.10 in 2024.
The primary reason for the change is that yield spreads have moved sharply in favour of the dollar.
EUR/USD has already weakened to 5-month lows below 1.0670 and ING considers that there would have been further losses were it not for a slightly more optimistic outlook for the global economy and robust risk appetite.
Overall US data releases have remained generally firm with no evidence of a hard landing at this stage.
The latest US inflation data was again stronger than expected which has triggered a further shift in expectations surrounding Federal Reserve interest rates with only a small chance of a June cut and the risk of less than two rate cuts this year.
ING also has a flat profile at 1.10 for 2025, although there is a high degree of uncertainty, especially given the US election this year and possibility of a Trump victory.
The bank notes that a loose fiscal policy and protectionist stance could be dollar-positive, although there would also be the risk of a rapid reversal if confidence in the US slides.
Key Quotes:
“Given the more substantial changes being made to our Fed profile this month, we feel that now is the right time to cut back our end 2024 EUR/USD forecast to 1.10, which is consensus.”
Sending large amounts of money abroad? Did you know you could save compared to using the high street banks? Get a free guide and start a chat with our team of foreign exchange experts.“Yet the reality is that real interest rate spreads have been steadily widening in favour of the dollar over recent months.”
“For USD/JPY, we are particularly revising up our 2025 profile given the view of our US rate strategy team that a term premium will probably have returned to US Treasury markets by this time.”
“Presumably opinion polls coming in after the summer break will start to weigh on FX markets.”
“A looser fiscal/tighter monetary policy mix under Donald Trump would likely be seen as more dollar-positive, although investors will be wary of debt sustainability.”
“Additionally, US protectionism during a US slowdown has not always ended well for the dollar; just think back to the early 1990s!”
Source link