EUR/USD will be more comfortable in a 1.0400 to 1.1200 range than at levels closer to 1.2000 – Rabobank

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EUR/USD has slowly trended lower since its late December high in the region of 1.1139. Economists at Rabobank analyze the pair’s outlook.

USD strength to moderate in the second half of the year

We maintain our one-month EUR/USD forecast of 1.0700 and our three-month target of 1.0500.

We expect USD strength to moderate in the second half of the year as the Fed’s rate cutting cycle kicks off.

Assuming that CPI inflation in the Eurozone can be kept under control, it is likely that Germany would benefit from a relatively weak EUR whilst it tackles structural reforms. For this reason, we see risk of EUR/USD being more comfortable in a 1.0400 to 1.1200 range over the next couple of years than at levels closer to 1.2000.