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May 23 - 12:55 PM

BofA: EUR/USD Outlook into Summer and Year-End

By eFXdata  —  May 23 - 10:45 AM

Synopsis:

Bank of America provides an outlook on EUR/USD as the market transitions into the summer months, aligning with the upcoming US Memorial Day. The focus is on recent disinflationary trends in the US and expectations for the Federal Reserve's monetary policy decisions towards the year-end.

Key Points:

  • Recent Data Trends: Recent US data has shown signs of cooling inflation and a more moderate labor market, prompting a cautious optimism among market participants.
  • Policy Outlook: Despite the encouraging signs, policymakers are seeking more data to confirm these trends as sustainable rather than transient.
  • Fed Rate Expectations: BofA's US Economics team anticipates one rate cut by the Fed in December, reflecting a cautious approach to monetary easing.
  • EUR/USD Forecast: Bank of America maintains its end-2024 EUR/USD forecast at 1.12, anticipating a modestly weaker dollar towards the end of the year and into 2025.

Conclusion:

While the near-term data from the US has injected some optimism into the market, the overall stance remains one of caution as further evidence is sought to confirm the disinflationary trend. This backdrop supports BofA’s view of a modestly softer dollar as 2024 closes, with potential impacts on EUR/USD as it trends towards their forecasted level of 1.12 by year-end.

Source:
BofA Global Research

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