Further Federal Reserve repricing is becoming incrementally less beneficial to the dollar, and the European Central Bank (ECB) has exceeded Deutsche Bank’s hawkish expectations. Subsequently, analysts at the bank forecast EUR/USD at 1.17 by end-2022.

EUR/USD is not priced for positive rates

“We have recently downgraded our EUR/USD forecast, implying a neutral view but with a bias to buy EUR/USD around 1.10 over Q2 and a stronger bullish view thereafter (1.17 year-end).”

“We see developments in the energy market as the most upfront negative for EUR/USD – elevated prices are not going away anytime soon.”

“On the flipside, further Fed repricing is becoming incrementally less beneficial to the dollar, the ECB has exceeded our (hawkish) expectations, and Europe’s fiscal response to offset the near-term growth impact looks sizeable.”

“Beyond EUR/USD, our forecasts also look for a broad peak in the dollar over Q2 followed by the beginning of a broader downtrend.”