Bank of America Global Research discusses EUR/USD outlook ahead of the Fed and ECB September policy meetings.
"The market focus will soon shift to the September ECB and Fed meetings. For the first time in this tightening cycle, we expect the two major central banks to hike at the same pace, 50bp. The market is pricing more for the Fed, 61bp vs. 47bp for the ECB. If anything, our economists see a risk that the ECB may actually hike by 75bp," BofA notes.
"The above suggests that the risks for EURUSD are shifting to the upside, but we remain cautious. This is consistent with our end-year EURUSD forecasts of 1.05. However, we expect a slow and choppy move. The ECB remains constrained by the periphery and the Italian elections in September are a key risk. The war in Ukraine and the energy crisis are affecting Europe particularly negatively and things could get worse this winter," BofA adds.