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Synopsis: Bank of America reaffirmed its bullish stance on EUR/USD, projecting the pair to reach 1.15 by the end of 2024, in contrast to the more conservative consensus forecast of 1.10 for this year and 1.14 by 2025. BofA’s optimism stems from expectations of a weaker dollar driven by moderating inflation and anticipated Federal Reserve rate cuts, enabling a shift towards equilibrium in USD value.
Key Points:
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Bullish on EUR/USD: BofA stands firm on its year-end target for EUR/USD at 1.15, anticipating most of the currency pair’s appreciation to occur in the second half of the year. This outlook positions BofA above the current market consensus.
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Consensus Comparison: The market consensus pegs EUR/USD at 1.10 for 2024, and 1.14 by 2025. BofA’s forecast extends further, envisioning EUR/USD at at 1.15 by end of 2024 and 1.20 in 2025.
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Unchanged Core USD Forecasts: BofA’s broader forecasts for the USD against G10 currencies remain steady. The bank anticipates broad USD depreciation in 2024, fueled by declining inflation rates and anticipated monetary easing by the Fed.
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EUR-CHF Adjustment: The only recent adjustment in BofA’s currency forecasts was an uplift in EUR-CHF projections following the Swiss National Bank’s unexpected decision to lower interest rates.
Conclusion: BofA’s steadfast prediction for EUR/USD to appreciate significantly by the end of 2024 reflects a bullish divergence from the market consensus. The bank’s expectations hinge on a broader theme of USD depreciation against G10 currencies, driven by moderating inflation and prospective rate cuts by the Federal Reserve. This outlook suggests a return towards a more balanced USD valuation as the year progresses, particularly in the latter half.
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