There is a clear divergence between the outlook of the Federal Reserve and European Central Bank (ECB) interest policy in 2022. Economists at Rabobank expect that USD upside has further to run in the early months of 2022. Consequently, they have revised down their six-month EUR/USD forecast to 1.10 from 1.12.
Doubts over whether bullish USD momentum can last the whole year
“We expect that USD upside has further to run in the early months of 2022 as the Fed winds down its bond buying programme and moves closer to its first rate rise of the cycle.With a lot of good news already in the price, we are concerned that the momentum behind the Greenback’s rally may run out of steam in the latter part of next year and see scope for the USD to have given back a little ground vs. the EUR on a 12-month horizon.”“While we see scope for EUR/USD to trend down to the 1.10 level in the coming months, we also see the likelihood of a retreat back towards the 1.12 area by the end of next year.”