USD/EUR Outlook: Slightly weaker, but likely to move sideways, as the rate is below the recent average and lacks a clear driver.
Key drivers:
• Rate gap: The Federal Reserve's anticipated rate cuts are increasing pressure on the USD compared to the European Central Bank’s stable rate policy.
• Risk/commodities: Oil prices are at recent highs, which typically supports the euro against the dollar as rising energy costs affect the US economy more significantly.
• One macro factor: Concerns over US government instability and geopolitical tensions are leading to decreased appetite for USD assets.
Range: The USD/EUR pair is expected to drift within its recent 3-month range as uncertainties weigh on both currencies.
What could change it:
• Upside risk: A sudden resolution to geopolitical tensions could strengthen the USD.
• Downside risk: A disappointing economic growth announcement from the Eurozone could weaken the euro further.