Economists at the bank of Montreal point out prerequisites needed to lift EUR/USD and GBP/USD above 1.10 and 1.25, respectively.

Reduced risk of economic hard landing in Europe provides better support to EUR and GBP

“It’s one month into 2023 and the reduced risk of an economic hard landing in Europe is providing better support to the EUR and the GBP. However, for sustained appreciation vs the USD, we think these currencies need a very sold risk appetite picture, and continued improvement in inflation.”

“Progress in the Ukraine war, limited disappointment in energy prices, and smooth global trade (‘Goldilocks’) may also be prerequisites for substantial progress above 1.10 in EUR/USD and 1.25 in GBP/USD.”