EUR/USD: Scope for dips over the next three months – Rabobank

EUR/USD has settled above the 1.09 level. Economists at Rabobank analyze the pair’s outlook.

USD’s turnaround will not be smooth

In the weeks ahead, we expect choppy activity as asset prices react to economic data releases in the hope of second-guessing Fed policy and see scope for EUR/USD to dip on a three-month view as the Fed battles to contain market expectations regarding the timing of interest rate cuts. 

Moreover, we maintain the view that the EUR is likely to be pressured by weak growth and low competitiveness in the Eurozone which suggests the potential for a prolonged period of relative weakness for the EUR.

While we have revised up our EUR/USD forecasts and now see EUR/USD at 1.09 on a 12-month view rather than 1.05, this is well below most model based estimates for fair value for EUR/USD.