EUR/USD has moved up from close to 0.95 to trading around 0.98. Nonetheless, economists at Nordea expect the pair to move back lower and bottom around the start of 2023.

A terms-of-trade shock will weigh on EUR/USD

“Some might wonder whether the rally for USD is finally behind us, but we don’t think so and believe this relief rally in financial markets is temporary – we have seen similar episodes many times over the past year.”

“More pain ahead for financial markets will continue to favor safe havens such as the USD. Moreover, the US economy is still resilient and will likely fare better than energy-importing major economies in Europe and Asia.” 

“We see EUR/USD pushing slightly below 0.95 over new-year, supported by higher USD interest rate differentials and the term-of-trade crisis in the euroarea.”