A more resilient Eurozone economy and a more hawkish European Central Bank offer support for the Euro, explain analysts at Well Fargo. They have a forecast for EUR/USD at 1.13 for the first quarter of next year and warn risks are clearly titled to the upside.

Key quotes:

“From a currency perspective, a more resilient (albeit still subdued) Eurozone economic outlook and a more hawkish European Central Bank monetary policy outlook clearly offers a more supportive mix for the euro exchange rate against the U.S. dollar. With respect to our base case forecast, it is quite possible that some of the weakness we had anticipated in the EUR/USD exchange rate in early 2023 may in fact not materialize.”

“The risks to our Q1-2024 target for the EUR/USD exchange rate of $1.13 are clearly tilted to the upside. In the context of recent developments, our outlook for the euro versus the U.S. dollar is shifting appreciably in the direction of a more constructive medium-term trend.”