EUR/USD has continued to track short-term rates, which now discounts the same ECB-Fed rate differential in December 2023 as when we were heading into the US regional bank crisis in March. On that basis alone, a fall in EUR/USD towards the year’s low above 1.05 wouldn’t be unreasonable, and only a change in the outlook for Fed and/or ECB rate prospects can turn the trend around. 

So far, softer-than-expected eurozone (headline) CPI data and another robust US labour market report don’t suggest a major change in trend and do therefore suggest caution.

The economy is slowing, the Fed is near the end of its hiking cycle, and neither the global energy backdrop nor the US balance of payments is a supportive factor anymore. So, we’ll wait for a better chance to buy the EUR.