EUR/USD: Further downside potential based on the poor economic performance of the Eurozone – Rabobank

The US Dollar is the best performing G10 currency in the year to date. Economists at Rabobank analyze EUR/USD outlook for the coming months.

EUR/USD to dip to 1.0500 on a three-month view

The cautious tone of the messaging from ECB policymakers has been similar to that of the Fed, but the USD was sold more aggressively into year-end allowing for a greater rebound.

The resilience of recent US economic data releases suggests further upside potential for the USD, while weak growth expectations from the Eurozone could weigh on the EUR.

Additionally, suppose the probability of Trump re-entering the White House strengthens. In that case, this will likely stir up issues related to Europe’s defence spending about Nato and Ukraine and concerns around trade tariffs. This could enhance the USD’s safe-haven appeal.

We continue to see risk of EUR/USD pushing lower to 1.0500 on a three-month view.