EUR/USD: Further declines likely in the near-term – Wells Fargo
08.09.2022, 15:43

EUR/USD: Further declines likely in the near-term – Wells Fargo

The European Central Bank raised key interest rates by 75 basis points on Thursday, in line with market expectations. The statement and Lagarde’s comments suggested more rate hikes ahead. The euro lost ground across the board after the meeting while the dollar rose boosted by Fed’s Powell remarks. Analysts at Wells Fargo see more declines in the EUR/USD in the near term as the Fed tightens further and amid the economic outlook of the Eurozone. 

Key Quotes: 

“Following today's record rate increase, we now forecast the European Central Bank will raise its Deposit Rate another 50 basis points in late October and also 50 basis points in December, lifting the Deposit rate to 1.75% by the end of this year. We expect a final 25 basis point rate increase to 2.00% in early 2023.”

“From a currency perspective, we still expect some further declines in the euro in the near-term, given the Fed remains firmly in tightening mode for now and with the Eurozone economic outlook less than stellar. We do expect some rebound in the euro in 2023 as a steady ECB monetary policy outlook sees the euro outperform against the U.S. dollar, with the latter likely weighed down by the anticipation and eventual implementation of Federal Reserve monetary easing by late 2023.”

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