Rabobank See Scope For EUR/USD To Move To $1.05 Before H2 Bounce

Rabobank write “despite this year’s adjustment in market pricing, in our view investors are still too aggressively positioned for Fed rate cuts.”

• “We a expect further correction in this outlook and consequently expect the USD to see some support on a 1-to-3-month view.”
• “Additionally, we expect the EUR to perform poorly in the months ahead largely on the back of weakness in the German economy. Rabobank economists expects a second quarterly contraction in GDP to be confirmed. This would indicate that Germany was in recession at the end of 2023.”
• “At the end of last month, the government agreed the key points of the 2024 budget. On the back of a decision by Germany’s Constitutional Court, the process had been thrown into disarray. Funding gaps will now be filled with cost savings which will drag down the growth outlook further and potentially slow structural reforms.”
• “In the past couple of years, Germany’s huge manufacturing base has been hit by the loss of its cheap energy supply, while demographics have resulted in more labour shortages and sluggish growth in China has impacted exports.”
• “We see scope for EUR/USD to dip to $1.05 on a 3-month view before the impact of Fed rate cuts boosts risk appetite and weakens the USD in the second half of the year.”