EUR/USD could still move back to parity in 2023 – Rabobank

The sell-off in the US Dollar in recent weeks has lifted EUR/USD completely clear of parity. Looking ahead to the New Year, however, there are plenty of factors that could still unnerve EUR bulls, economists at Rabobank report.

Out of the woods? 

“The ECB has a specific challenge given the different debt profiles within member nations and the possibility of spread widening vs. Bunds, particularly in the BTP market, once QT starts. This could trigger risk aversion and weigh on the EUR.”

“Insofar as the current account surplus of the Eurozone has been eroded by expensive energy imports, the EUR is likely to be more sensitive to bad news than in previous years.” 

“While EUR bulls may be cheered in the short term by less bad recession fears for Germany, less high energy prices and a hawkish ECB, the single currency is not out of the woods. These risks could still push EUR/USD back to parity in 2023.”