Analysts at Wells Fargo continue to forecast a stronger US dollar against most foreign currencies through early 2023. They look for a weaker euro than previously, with the region's economy now expected to fall into recession. They forecast the EUR/USD pair will reach 0.96 by the first quarter of next year and move back above parity by the fourth quarter of 2023. 

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“In the months and quarters ahead we will be watching closely for further signs that “peak inflation and peak interest rates are closer at hand. Central bank policy rates and changes to interest rate expectations are important factors we consider when we construct our view on the U.S. dollar. In the short term, we believe market conditions are still conducive to a stronger greenback, and we maintain our view for moderate dollar strength through the end of this year.”

“Should inflation show more concrete signs of peaking and Fed rate hike expectations scale back even further, we believe the dollar could top out earlier than we currently forecast. As of now, we believe the trade-weighted U.S. dollar is likely to peak in Q1-2023 and trend lower over the course of next year as the Federal Reserve entertains, signals, and eventually lowers interest rates.”

“We have become less constructive on the euro's prospects. With the Eurozone now expected to fall into recession and a relatively limited monetary tightening cycle likely from the European Central Bank (ECB), we expect the EUR/USD exchange rate to fall to $0.9600 or lower.”