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Euro to Dollar End-2024 Forecast: 1.10 by 2025 say ABN Amro

April 7, 2024 - Written by David Woodsmith


Foreign exchange analysts at MUFG forecast that the Euro to Dollar (EUR/USD) exchange rate will strengthen to 1.12 at the end of 2024 as the Fed cuts rates.

In contrast, Credit Agricole expects a retreat to 1.05 amid Euro-Zone economic vulnerability.

The Euro to Dollar (EUR/USD) exchange rate was subjected to choppy trading during the week.

Initial gains to 6-week highs reversed sharply after weaker-than-expected data before fresh gains after another stronger-than-expected employment report.

US non-farm payrolls increased 303,000 for March compared with consensus forecasts of an increase around 210,000 while there was only a slight downward February revision to 270,000 from 275,000 reported previously.

According to the household survey, there was a strong increase in the number of employed of close to 500,000 while the unemployment rate edged lower to 3.8% from 3.9%.

Average hourly earnings increased 0.3% for the month with a 4.1% year-on-year increase from 4.3%, in line with expectations.

Following the data, market expectations of a June rate cut dipped to near 50%.

MUFG expects a June rate cut and expects that there will be five rate cuts for the year.

According to MUFG; “The US dollar is set to break out of the recent narrow trading range, with a move to the downside as the Fed starts to cut rates. The scale of dollar depreciation will also be dependent on global economic conditions. Only marginal improvement in global growth is expected and hence only moderate USD weakness is expected.”

Nordea is still cautious over the inflation outlook and added; “it will probably take some months until the central bank can reach the same level of confidence on inflation that they had in December.”

Nordea added; “We continue to find that the prerequisites for the Fed to start cutting rates are not here, and we see the first 25bp rate cut at the September meeting, followed by similar moves in December and March 2025.”

Rabobank notes the potential for dollar strength to persist; “If expectations regarding the amount of Fed easing reduce further, the implication is that the USD could remain stronger for longer.”

It notes that this will have implications for other central banks; “with inflation coming back under control in most of the G10, softer exchange rates will not be as unwanted as they would have been a year or two ago.”

Credit Agricole considers that the Euro-Zone economy is still struggling with vulnerable fundamentals.

It added; “They further add conviction to the view that the Eurozone needs a weaker EUR – to help restore and maintain international competitiveness against a very challenging global backdrop.”

The ECB will announce its latest policy decision in the week ahead with expectations of no change at the same time as a strong signal of a June cut.

Nordea discussed the ECB outlook and commented; “While an April cut is not totally out of the question, we think the ECB will give further signals that it is set on cutting rates at the June meeting.

Danske noted; “Markets are pricing a roughly 10% likelihood of a 25bp rate cut at the April meeting – if that does happen, we expect EUR/USD to be significantly lower in a knee-jerk reaction. However, we find a rate cut unlikely, and hence we expect a muted market reaction.

Danske overall is still bearish on EUR/USD; “We believe the US economy holds a stronger position relative to the euro area, based on factors such as relative terms of trade, real rates, and relative unit labour costs.

ABN Amro expects the Fed and ECB will cut rates by a similar amount and added; “This would imply that EUR/USD stays close to current levels if no other driver presents itself.

It has an end-2024 EUR/USD forecast of 1.10.
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