Snippet via Capital Economics on their EUR/USD view:
- We expect the euro to depreciate markedly on the back of a further deterioration in economic activity
USD to appreciate, Capital Eco say, citing their pessimistic outlook for major developed market economies (US and euro-zone included) that suggest to them that the USD will appreciate against most FX, gaining from sentiment that'll skew to risk-off.
- we forecast the euro to drop back to parity by the end of 2023
Another reason Capital Eco like the USD is due to the AI/tech boom:
- "We think this is increasingly reminiscent of the late-1990s dotcom era, and now expect a similar bubble to form in the U.S. equity market over the coming years. ... the dotcom era was accompanied by a substantial rise in the dollar, partly driven by capital inflows related to the stock market boom. So if we are right that the AI euphoria will continue, it may help the dollar rebound - and, perhaps, stay stronger for longer than we currently forecast"
