EUR/USD to nosedive to 1.12 in 2022 on stark Fed/ECB contrast – SocGen
|FX analysts at Société Générale have updated their euro forecast from 1.22 to 1.19 in 2021 and from 1.26 to 1.12 in 2022, pointing to much weaker EUR/USD than previously anticipated.
See: EUR/USD to edge lower towards 1.16 on Fed’s hawkish tilt – Rabobank
Fed’s rate-hiking cycle to strengthen the dollar
“The Fed funds rate target isn’t going to change any time soon. The rates market is pricing 12.5bp of hikes by the end of 2022 – so still nothing for at least 12 months.”
“FX has been following rates moves rather than the other way around, but even so it’s a stretch to think that rate hike expectations will simply settle down for the next 12 months.”
“To justify EUR/USD trading down to 1.12 (our 3Q22 forecast), the yield differential needs to widen by over 100bp. EUR/USD pretty much always overshoots the rate cycle, but the overshoot isn’t likely to happen until the rate cycle is much more imminent.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.