Analysts at ABN Amro expect more weakness in EUR/USD due to the policy divergence between the Federal Reserve (FED) and the European Central Bank (ECB). They forecast the world's most popular currency pair as low as 1.05 by end-2022.

Significant policy divergence between the Fed and the ECB over the coming years

“We now expect that the Fed will begin hiking interest rates in mid-2022, with the goal of returning the Fed funds rate to the pre-pandemic target range of 1.50-1.75 by the end of 2023.”

“We believe that the ECB is facing a different set of macroeconomic circumstances than faced by the US central bank. The ECB has also explicitly ruled out a rate hike in 2022 and has hinted that it could well be ‘on hold’ for much longer.” 

“Our forecast for EUR/USD at year-end 2021 is 1.10 and 1.05 for year-end 2022.”