The Dollar is heading lower. Economists at Deutsche Bank see EUR/USD rising to 1.15 over the course of 2023.

The pieces are falling in place for a more sustained downturn in the Dollar

“The pieces are falling into place for a more sustained downturn in the Dollar. The combination of China reopening and improvement in the European energy situation should reduce the safe-haven premium underpinning the Dollar.”

“We are still missing the bull-steepening in the US yield curve which is typically associated with clearer USD downtrends, and the USD remains a high-yielder in a global context. But as confidence grows in a peak inflation narrative, we see EUR/USD rising to 1.15 over the course of 2023.”

“Tailwinds are seen from; a) narrowing in Fed-ECB rate differentials, and structurally easier fiscal policy in Europe; b) improvement in Europe’s basic balances given lower energy imports and a drop off in bond outflows from Europe; c) beta to China re-opening and global growth cycle; and d) large cash positions in an overvalued Dollar.”