Synopsis:

BofA maintains a EUR/USD outlook of short-term weakness but a medium-term recovery. They do not expect parity, but the pair could drift lower before rallying to 1.10 by year-end—well above consensus. With EUR/USD already at their mid-year forecast of 1.05 ahead of schedule, their broader view remains intact: USD strength persists in Q1, but fades in H2 2025.

Key Points:

Near-Term EUR/USD Weakness

• The USD remains broadly supported through Q1.
• EUR/USD may face further pressure but should stop short of parity.

Gradual EUR/USD Recovery Later in 2025

• USD depreciation expected in H2 as global growth stabilizes.
• EUR/USD is forecast to rally towards 1.10 by year-end.
• This projection is above consensus expectations.

Forecast Timeline

• Mid-year target of 1.05 reached early—but view remains unchanged.
• Expecting further near-term EUR/USD weakness before a recovery later in 2025.

Conclusion:

BofA sees limited downside for EUR/USD in the near term before a stronger rebound in H2 2025. Parity is unlikely, and they expect a year-end rally to 1.10, suggesting EUR shorts may be exhausted later this year.