Synopsis:

Barclays anticipates EUR/USD to rise towards 1.12 by year-end, driven by recent shifts in Fed policy expectations and political developments. However, they foresee a decline below 1.10 in 2025 due to a weakening macroeconomic backdrop in Europe and China.

Key Points:

1. Short-Term Outlook: The EUR/USD exchange rate is expected to approach 1.12 by the end of the year, buoyed by the Fed's changing easing cycle and President Biden's withdrawal from the 2024 election.
2. ECB and Fed Dynamics: A gradual ECB cutting cycle and ongoing fluctuations in Fed pricing could contribute to additional near-term gains for EUR/USD.
3. Long-Term Perspective: Barclays predicts that the weaker macroeconomic conditions in core Europe and China will eventually dominate, leading to a decline in EUR/USD to below 1.10 over the next few quarters.

Conclusion:

While Barclays forecasts a short-term rally in EUR/USD towards 1.12 due to recent developments, they project a decline below 1.10 in 2025 as the macroeconomic challenges in Europe and China become more pronounced.