A bullish leap of faith on the Euro is too dangerous, in the opinion of economists at ING. They expect the EURUSD pair to be in the 0.95-1.05 range for most of the next year.

Market’s bromance with the Dollar will continue for a while yet

“We are bearish on EURUSD into the end of the first quarter of 2023.” 

“Recession in Europe means that EURUSD could be trading in a 0.95-1.05 range for most of the year, where fears of another energy crisis in the winter of 2023 and uncertainty in Ukraine will hold the euro back.”

“The sufficient condition for a EURUSD turnaround is the state of affairs amongst trading partners. Are they attractive enough to draw funds away from USD cash deposits potentially paying 5%? That is a high bar and why we would favour the EURUSD 2023 recovery being very modest, rather than the ‘V’ shape some are talking about.”

“The case for a central bank pivot is stronger for the ECB than the Fed. We see the ECB tightening cycle stalling at 2.25% in February versus the near 3% currently priced by the market for 2023. Add in global merchandise trade barely growing above 1% next year plus the risk of tighter liquidity spilling into financial stability – all suggest the market’s bromance with the Dollar will continue for a while yet.”