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Euro/USD’s Adjustment Potential Still Warrants Attention
As Federal Reserve officials push back against recent dovish repricing, we believe that there is still some room for adjustment in the Euro/USD exchange rate.
In recent weeks, the market has priced in approximately 20 basis points of easing along the Euro OIS curve by mid-2024. However, unlike the Fed, the European Central Bank’s dovish repricing is based on more compelling evidence of an economic slowdown, which implies that convincing the market for rate cuts may be a tougher task for ECB members.
In the days ahead, Euro/USD may continue to gradually retrace towards the 1.0600/1.0650 range.
