ING’s year-end target for EUR/USD now sits at 1.20.

The bumpy path to a higher EUR/USD

“Based on our view that the Fed tightening cycle is over and that a credit crunch makes a US recession more likely, we believe the Dollar is about to embark on a multi-quarter (if not multi-year) decline. The bulk of that Dollar decline may come in 2H23 as the US disinflation story builds and the Fed front-loads easing with 100 bps of cuts in 4Q23. That could see EUR/USD at 1.20 end year.”

“The road to a Dollar decline will not be smooth, however. The most pressing risks are the US banking crisis and the risk of a US Treasury default in the June/July window. Historically, stress in US money markets has triggered a temporary surge in the Dollar.”

“Any flash crash below 1.05 should be temporary, however.”