Interest rate differentials point to a higher EUR/USD – Nordea

EUR/USD came briefly above 1.10 this week before falling to just below 1.09 today. Economists at Nordea note that the rate differentials continue to point toward a higher EUR/USD ahead.

EUR/USD to move about sideways in the near term

“Given that the ECB has had room for more positive rate surprises than the Fed, a higher EUR/USD is understandable.”

“The better outlook on the Euro Area’s energy balance also points toward a lower risk-premium on the Euro.” 

“In the short-term, we see EUR/USD moving about sideways as markets reprice expectations on both the Fed and the ECB, however, it is clear that the rate differentials continue to point toward a higher EUR/USD ahead. China's reopening also points in that direction due to a better outlook for the global economy.”