EUR/USD: Range-bound outlook with policy risks – Societe Generale

Societe Generale’s Kit Juckes argues EUR/USD is likely to stay range-bound as geopolitical risks and US policy uncertainty offset economic fundamentals. He notes two-year rate differentials point to EUR/USD near 1.14–1.17, while consensus GDP suggests 1.14 is appropriate. However, Trump’s preference for a weaker Dollar and lower rates supports a softer Dollar and potential return to 1.20.

Rates, growth and policy pull cross

"Risk aversion is likely to keep FX volatility down and G10 pairs in tight ranges, starting with EUR/USD."

"Two-year rates imply that EUR/USD ‘ought’ to be at 1.14 and if consensus rates forecasts are right, will head to 1.17 in the coming year."

"Consensus GDP forecasts suggest 1.14 would be a more appropriate level, which is where we put our end-year forecast before everything got complicated."

"President Trump’s desire for a weaker dollar, and his desire for lower rates regardless of what growth and inflation are doing, play a part in keeping the dollar down."

"Given that every time the market is optimistic that further escalation is unlikely, the dollar weakens, it still seems likely that we will see EUR/USD 1.20 again, and a generally weaker dollar, in the coming weeks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)