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Bank of America Projects EUR/USD Weakness to Persist Through Q3
Bank of America analysts project the euro will continue to weaken against the U.S. dollar through the end of the third quarter, citing a combination of robust economic data in the United States and a hawkish monetary policy stance from the Federal Reserve.
Dollar Supported by Fed Policy and Energy Prices
According to a research note from the bank, the dollar's current strength is primarily underpinned by the Federal Reserve's commitment to maintaining a tight monetary policy to manage inflation. This is further supported by U.S. economic indicators that continue to show resilience.
Bank of America also identified rising oil prices as another factor providing short-term support for the dollar. This combination of factors is expected to exert downward pressure on the EUR/USD pair, one of the most actively traded currency pairs in the world, for the remainder of the quarter.
Potential Shift After Q3
AdThe outlook suggests a potential reversal in the trend after the third quarter concludes. Analysts at the bank anticipate the dollar could begin to lose momentum once two key conditions are met.
The forecast assumes that oil prices will eventually retreat from their highs and that market expectations for future Fed interest rate hikes will be fully priced in. Once these drivers of recent dollar strength have been fully absorbed by the market, the currency may start to weaken.
Bank of America did not provide a specific numerical target for the EUR/USD exchange rate in its outlook report.
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