The analysts of Wells Fargo they continue to forecast a stronger US dollar against most currencies through early 2023. They forecast a weaker euro than before as the region’s economy is expected to slip into recession. They forecast that the EUR/USD pair will reach 0.96 in the first quarter of next year and will break above parity again in the fourth quarter of 2023.
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“In the coming months and quarters we will be watching for further signs that ‘peak inflation and peak interest rates are closer’. Central bank interest rates and changes in interest rate expectations These are important factors that we take into account when making our opinion on the US dollar. In the short term, we believe that market conditions continue to favor a stronger dollar, and we maintain our view of moderate dollar strength through the end of this year..”
“Should inflation show more concrete signs of peaking and Fed rate hike expectations are lowered further, we think the dollar could top out sooner than we currently forecast. As of now , we believe that the American dollar trade-weighted will likely reach its peak in the first quarter of 2023 and trend downward over the course of the next yearas the Federal Reserve signals and eventually lowers interest rates.”
“We have become less constructive on the outlook for the euro. With the Eurozone expected to slip into recession and a relatively limited tightening cycle by the European Central Bank (ECB), we expect the EUR/USD exchange rate to fall up to 0.9600 or below.”
Source: Fx Street
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