EURUSD is currently trading below the 0.98 level. However, economists at Westpac expect the pair to stage a substantial recovery towards 1.07 by the end of next year.

Removal of downside risks related to European energy supply to lift EUR

“While it increasingly looks as though EuroArea activity growth will outpace that seen in the US through 2022 and 2023, this is not the primary factor behind our forecast. Instead it is the removal of downside risks related to European energy supply, with the Continent’s gas stores essentially filled ahead of winter and infrastructure necessary to allow the replenishing of reserves through 2023 now in place.”

“Our central expectation is for EURUSD to rise from below 0.98 currently to 1.07 and 1.14 at end-2023 and 2024 respectively.” 

“If the winter weather proves benign as the market is increasingly suspecting, upside risks for Euro may build in the new year.”