A bullish leap of faith on the Euro is too dangerous, in the opinion of economists at ING. They expect the EURUSD pair to be in the 0.95-1.05 range for most of the next year.
“We are bearish on EURUSD into the end of the first quarter of 2023.”
“Recession in Europe means that EURUSD could be trading in a 0.95-1.05 range for most of the year, where fears of another energy crisis in the winter of 2023 and uncertainty in Ukraine will hold the euro back.”
“The sufficient condition for a EURUSD turnaround is the state of affairs amongst trading partners. Are they attractive enough to draw funds away from USD cash deposits potentially paying 5%? That is a high bar and why we would favour the EURUSD 2023 recovery being very modest, rather than the ‘V’ shape some are talking about.”
“The case for a central bank pivot is stronger for the ECB than the Fed. We see the ECB tightening cycle stalling at 2.25% in February versus the near 3% currently priced by the market for 2023. Add in global merchandise trade barely growing above 1% next year plus the risk of tighter liquidity spilling into financial stability – all suggest the market’s bromance with the Dollar will continue for a while yet.”
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