Synopsis:

ANZ expects EUR/USD to continue trending higher into year-end, supported by resilient Eurozone fundamentals, haven demand, fading USD appeal, and a slowing ECB easing cycle. Despite geopolitical risks, the pair is forecast to reach 1.20 by December.

Key Points:

• EUR Haven Appeal:
  EUR/USD rallied from 1.08 to 1.16 in Q2, driven partly by safe-haven inflows amid global uncertainty, particularly Middle East tensions.

• Macro Backdrop Improving:
  Eurozone Q1 GDP rose 0.6% q/q, and May CPI dipped to 1.9%, meeting the ECB's target. PMI data suggest manufacturing contraction is easing.

• ECB Outlook:
  The June rate cut to 2% likely marked the end of the aggressive phase, with only one more cut expected in 2025.

• USD Weakness Expected:
  ANZ sees two Fed cuts by year-end, alongside softening US data and renewed tariff concerns, reducing USD appeal.

Conclusion:

Barring major geopolitical disruptions or a sharp oil surge, EUR/USD is set for further gains with ANZ maintaining a year-end target of 1.20, supported by improving Euro area data and growing haven demand for the euro.