We make no changes to our long-term EUR/USD forecast and therefore, we maintain our strategic case for a lower EUR/USD based on relative terms of trade, real rates and relative unit labour costs. 

We forecast the cross at 1.06/1.03 in 6/12M. 

In the near term, we stick to our topside risk call in EUR/USD. We expect a turnaround in the exceptional run of positive US economic data surprises to weigh on the USD. Additionally, we believe that peak policy rates, improvements in the struggling manufacturing sector, and a bottoming out of China pessimism will provide some support to EUR/USD in the near term.

The risks primarily consist of an escalation in the Middle East, leading to both a risk-off sentiment and higher energy prices, resulting in a stronger USD.