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May 14 - 06:55 PM

Credit Agricole: EUR/USD Targets and Risks for Q4 2024 and Q4 2025

By eFXdata  —  May 14 - 03:00 PM

Synopsis:

Credit Agricole provides its EUR/USD forecast for the next two years, outlining expectations for a decline in 2024 due to prevailing policy divergence and market dynamics around the US presidential elections. The bank also anticipates a rebound in 2025 based on projected changes in the US economic environment.

Key Points:

  • Q4 2024 Forecast: Credit Agricole anticipates EUR/USD to reach 1.05 by the end of 2024, influenced by sustained policy divergence between the Federal Reserve and other G10 central banks, alongside heightened market caution due to the US presidential elections.
  • Q4 2025 Projection: The bank expects EUR/USD to recover to 1.12 by the end of 2025. This forecast is based on a more aggressive cycle of Fed easing driven by a deteriorating growth outlook and slowing inflation in the US.
  • Upside Risks: The main risks to this outlook skew towards a stronger USD. These include more resilient US economic fundamentals potentially spurred by ongoing fiscal stimulus, persistently high US inflation possibly driven by new tariffs, a weak dollar policy, or migration restrictions, and a less dovish or more independent Federal Reserve.

Conclusion:

While Credit Agricole anticipates a near-term decline in EUR/USD due to US-centric factors and monetary policy discrepancies, the bank expects a reversal in the dollar's fortunes as the economic conditions in the US prompt a more pronounced easing cycle by the Fed in 2025. However, the noted risks could disrupt this trajectory, potentially maintaining a stronger USD than forecasted.

Source:
Crédit Agricole Research/Market Commentary

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