In the last month, we have had a sharp sell-off in the US Dollar. Economists at Nordea expect the greenback to remain supported in the near-term, however, EUR/USD is set to edge higher next year.

Dollar’s rise on increasing recession risks to be brief

“In the short-term, we believe EUR/USD is bound for a slight pullback, rather than a quick trend reversal for a higher EUR/USD. Key to our thinking is that downside risks prevail in financial markets, which will benefit the safe haven USD.”

“Looking ahead, the USD is likely to rise initially in response to rising recession risks in the US and Europe, but not substantially unless we end up in a severe recession, which we do not expect.” 

“We expect the USD to keep its shine in the short-term, but once investors focus on weakening growth and its impact on inflation, we expect EUR/USD to rise from historical low levels this year.”