EUR/USD to trade at lower levels on a 6-12M horizon – Danske Bank

EUR/USD has received support on the back of a dovish Fed and the ECB delivering push-back on rate cut expectations. Economists at Danske Bank analyze the pair’s outlook.

Good opportunities for USD weakness in the near term

We maintain the strategic case for a lower EUR/USD based on the relative terms of trade, real rates (growth prospects), and relative unit labour costs. Hence, we continue to expect a downward trajectory over the next 3-12M.

In the near term, we still see good opportunities for USD weakness. The considerable easing of financial conditions over the past month, in conjunction with bearish USD year-end seasonality, could provide some support to EUR/USD over the next couple of months.

Forecast: 1.11 (1M), 1.10 (3M), 1.07 (6M), 1.05 (12M)