Synopsis:

ING predicts a gradual rise in the EUR/USD pair throughout 2024, largely hinging on anticipated shifts in the US economic landscape and Federal Reserve policy. The bank's year-end target for EUR/USD is set at 1.15, slightly above the current consensus of around 1.11.

Key Insights:

• US Economic Slowdown: ING's projection is based on the expectation of a slowdown in the US, with inflation easing and the Fed reducing the restrictiveness of its monetary policy. The forecast includes 150 basis points of Fed rate cuts starting in mid-2024.

• US Growth Forecast: A critical factor underpinning this outlook is the prediction of US growth at just 0.5% for the next year, notably below the consensus of 1.0%.

• Timing of EUR/USD Strength: While ING anticipates strength in the EUR/USD, they believe it will become more pronounced from the second quarter onwards. The dollar's typical strong performance at the start of the year, coupled with the eurozone's recession, suggests the first quarter might be too early for a significant upward shift in EUR/USD.

• Comparison with Consensus: ING's end-year forecast for EUR/USD is more bullish compared to the general market consensus, signaling a slightly more optimistic view of the euro's performance against the dollar.

Conclusion:

ING's analysis points to a cautiously optimistic trajectory for the EUR/USD pair in 2024, with a gradual rise expected as the year progresses. This outlook hinges on key economic developments in the US, including a slowdown in growth and a shift in Fed policy. Investors and market participants should monitor these underlying factors closely, particularly in the first half of the year, to gauge the potential for the anticipated appreciation of the euro against the dollar.