As the Federal Reserve and foreign central banks become more active over the next several quarters, economists at Wells Fargo believe monetary policy differences will become increasingly important for currency performance during that period. Subsequently, they forecast EUR/USD at 1.05 and USD/JPY at 123.00 by early 2023.
Monetary policy divergence to be very consequential for the euro and the yen
“The ECB so far it sees that uptick in prices as temporary and has expressed less concern about inflation pressures than most other major central banks. That is reflected in the ECB's December monetary policy announcement, where it also gave no indication policy rates would rise any time soon. This divergence between the outlook for ECB policy and a faster acting Federal Reserve underpins our forecast for a weaker euro and for the EUR/USD to fall to 1.05 by early 2023.”
“We expect Bank of Japan monetary policy to remain on hold for the foreseeable future. As the Fed tightens policy and US bond yields rise over time, we target a USD/JPY exchange rate of 123.00 by early 2023.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds losses below 1.1450 ahead of Eurozone HICP inflation data
EUR/USD keeps the red below 1.1450 in European trading on Tuesday. The US Dollar recovers its ground on technical correction, despite growing trade and economic concerns due to Trump's tariffs flip-flopping, weighing on the pair ahead of the EU inflation and US JOLTS data.
GBP/USD trades with negative bias below 1.3550 ahead of Bailey's testimony
GBP/USD stays pressured below 1.3550 in Tuesday's European session, eroding a part of the overnight strong move up to the 1.3560 area, or a multi-day peak. The price remains weighed down amid a modest US Dollar uptick, though the fundamental backdrop warrants some caution for bearish traders.
Gold price keeps the red below multi-week high; lacks follow-through selling
Gold price retains its negative bias through the Asian session on Tuesday though it does lacks bearish conviction. A modest US Dollar bounce, along with a generally positive risk tone, triggers the intraday pullback from a three-week high. However, a combination of factors is holding back traders from placing aggressive bearish bets.
Crypto Gainers WIF, SPX, HYPE: Meme coins soar with Bitcoin’s recovery to $106K
Crypto market bounces back as Bitcoin (BTC) reclaims the $106,000 level at press time on Tuesday, resulting in a refreshed rally in top meme coins such as Dogwifhat (WIF) and SPX6900 (SPX), and Pepe (PEPE).
AUD/USD turns lower toward 0.6450 after RBA Minues, poor China's PMI
AUD/USD is meeting fresh supply toward 0.6450 in the Asian session on Tuesday as traders digest the RBA Minutes and the unexpected contraction in China's May Caixin Manufacturing PMI. Additionally, a modest US Dollar rebound keeps the pair undermined.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.