FXStreet reports that economists at HSBC discuss EUR/USD prospects.

“We believe a key headwind to extended EUR/USD gains beyond 2018 highs is that the personality of the FX market is set to change in the coming months, once the Fed moves more stridently towards its taper later this year and relative interest rates increase their influence relative to risk appetite. It is a transition that is likely to cap much of the USD-driven upside for EUR/USD that has been such a big part of the rally over the past year. However, we are not convinced that this transition point has been reached in full and a still-patient Fed may frustrate the more hawkish elements of the market. All this should leave the door open to some modest USD weakness over the near-term.”

“For the EUR, domestic positives do exist, including the accelerating vaccine roll out, the economic reopening and associated upswing, and the ground-breaking EU recovery fund. But they will only be able to elicit a modest degree of EUR strength.”