The Dollar is around 10% off the highs seen in late September. Consensus expects the Dollar to weaken further this year, and economists at ING agree.
Sustained EUR/USD gains beyond 1.15 may be harder to achieve in H2
“At the heart of the bearish Dollar view is the call that the Fed will shift to a reflationary stance in the second half of 2023, US short-dated yields will fall and those yield differentials will move against the Dollar.”
“Lower natural gas prices have seen the eurozone terms of trade improve markedly and justify fundamentally higher levels of the Euro. Assuming that the China reopening story continues to evolve positively, we think this confluence of factors can drive EUR/USD steadily higher throughout 2023. Most of the gains, however, may come in the second quarter, when US inflation is seen falling quite sharply.”
“Sustained EUR/USD gains beyond 1.15 may be harder to achieve in the second half – especially if US debt ceiling negotiations are pushed to the limit.”
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