EUR/USD Forecast: Will the Euro Rise Above 1.13 by Year End?
During our Economics Live webinar, a recent poll revealed that market sentiment is shifting towards a more bullish outlook for the EUR/USD pair. While in early June, the majority of respondents expected the currency pair to remain below 1.11 by year end, the latest poll shows a shift with 25% predicting a rise above 1.13 and 46% expecting a stable range between 1.10-1.13. This change in sentiment is attributed to a recent 5% dollar sell-off and the anticipation of the Fed’s upcoming easing cycle.
According to ING’s FX strategist Chris Turner, only 1% of respondents now believe EUR/USD will end the year below 1.07. The market is currently pricing in a sub-3% terminal rate for the US dollar, indicating a bearish outlook for the currency. The divergence between short-dated US yields and Fed Funds rate suggests further weakness in the USD, especially leading up to the US elections in November.
Today’s focus will be on key economic data releases such as ADP employment data, initial claims, and the ISM services index. Despite recent signs of economic slowing, job layoffs have not seen a significant increase in Fed districts. Tomorrow’s August jobs data will be a major event to watch, with expectations for DXY to remain within a 101-102 range in the short term. However, the overall bias remains bearish for the dollar in the coming weeks.
Analysis: The latest poll results and market dynamics suggest a more positive outlook for the EUR/USD pair, with a potential rise above 1.13 by year end. The shift in sentiment is driven by a weakening US dollar and expectations of Fed rate cuts. Investors should keep a close eye on upcoming economic data releases and the August jobs report to gauge the future direction of the currency pair. A bearish bias for the dollar is forecasted in the medium term, with potential implications for global markets and investment strategies.