EUR/USD to start edging higher in H2 and through 2023 – Rabobank

Analysts at Rabobank consider the US dollar has the capacity to move EUR/USD to the 1.10 area this year, they are projecting this on a 6 month view based on the expectation that the Federal Reserve’s tightening cycle will be underway by then. Later they see the EUR/USD rebounding. 

Key Quotes: 

“The June FOMC was instrumental to the turnaround in USD sentiment last year since the movements in the dot plot at this meeting stimulated the debate about the prospects of a Fed rate rise in 2022.  Even though Fed-related news this year has retained a hawkish tone, the USD is struggled to find its feet.  Insofar as there is already a lot of hawkish news in the price, the USD may need to see some pullback and fresh news on the interest rate front before finding direction.”

“While we expect that the USD has the capacity to move towards the EUR/USD1.10 area this year, we are projecting this on a 6 month view based on the expectation that the Fed’s tightening cycle will be underway by then. Given that there is currently a lot of good news in the price, we expect that the USD may continue to struggle to find its feet in the near-term.”

“During the latter part of this year, expectations regarding rate hikes in other G10 central banks and the possibility that CPI inflation in the US will start moving back towards the Fed’s target could sap the outlook for the USD.  We expect EUR/USD to start edging higher in H2 and through 2023.”