Eurozone economy is set to tip into recession in the coming quarters. Nonetheless, the EUR/USD pair is unlikely to see a sustained move under parity.

Narrowing yield spreads between the US and Germany to support the EUR in 2023

“A recession in the eurozone combined with a more aggressive path of rate hikes in the US compared to the eurozone will probably keep the euro under pressure versus the US dollar this year.”

“But we still think that a sustained move in EUR/USD below parity will be difficult. Therefore, we keep our forecasts for EUR/USD for end-2022 at 1.00.” 

“In 2023, we expect narrowing yield spreads between the US and Germany to support the euro, with our end-2023 forecast at 1.10 (was 1.15).”