EUR/USD set to end the year at 0.93 – Nordea

EUR/USD has come above parity. However, economists at Nordea expect the greenback weakness to prove only temporary and forecast the world’s most popular currency pair at 0.93 by the end of the year.

Markets will again get a cold shower from the Fed at their November meeting

“The Fed will need to see clear signs of weaker wage growth before they are satisfied and we struggle to see that will be the case with this week’s data when the US labour market is still very thigh. Hence, the USD weakness that we currently see could very well end up being short-lived if the Employment Cost IndexI shows high(er) wage growth, which in turn should push rates up and stocks down again.”

“We expect a 75 bps rate hike from the Fed next week, and 50 bps hikes in December 2022 and February 2023.”

“The latest weather prognosis show mild weather for some time ahead. While this will offer much needed relief to euroarea, the energy crisis is far from resolved. The weather will eventually turn colder, forcing companies to drawn on gas storages. Political/fragmentation risks are still present, and we believe the ECB will have a tough time hiking rates as much as markets expect. Moreover, the expected ECB rate hikes have generated criticism from the new Prime minister of Italy. All of this makes us still hesitant on the euro in the time to come.”

“We see EUR/USD at 0.93 around year-end.”