BofA raises its EUR/USD forecast for Q3 to 1.08 from 1.02 previously
The firm's head of G-10 currency strategy, Athanasios Vamvakidis, said in a note to clients that their forecast may represent some downside but argues that the downside in the pair is likely to be more limited in the near-term.
"ECB easing has been positive for the EUR by supporting the Eurozone economy and also pushing against market concerns that the ECB may not be able to do what it takes. Similarly, on fiscal policy, European moves on stimulus and the recovery fund proposals were positives and supporting for the EUR in the near-term."
Despite those developments, the firm still maintains their call for the dollar to regain further ground later in the year. Thus, affirming their EUR/USD forecast for Q3 at 1.08 and forecast for Q4 at 1.05 before only experiencing a rebound next year.
"After broader dollar bullishness this year, we expect EUR/USD to rise next year, as part of a recovery that may more convincingly take hold. Our target of 1.15 for the end of 2021 marks our expectations that recovery will still be incomplete for some time, given that our estimates for long-run equilibrium for EUR/USD is in the low-to-mid 1.20 range."
