We expect EUR/USD to move largely sideways until next summer but with large swings around 1.08.

Our expectations are that the ECB will start lowering rates from summer 2024 while the Fed won’t cut rates before 2025. Such an interest rate development favors a slightly stronger USD against the EUR next year.

However, there are more FX drivers than interest rates and we are still inclined to think that the USD fortunes will turn going into 2025. For one, it is unlikely that the solid US economic outperformance vis-à-vis the rest of the world will last. Moreover, given our view for relative soft landing in the Western world, if the ECB actually cuts next summer, risk sentiment could become more positive and markets are unlikely to send the USD much stronger.