Rabobank’s Senior FX Strategist Jane Foley projects that while interest rate differentials may support an upward bias in EUR/USD during the second half of the year, the upside for the Euro is expected to be limited due to growth challenges in the Eurozone stemming from the current supply shock [1]. Foley explicitly states that EUR/USD reaching 1.20 this year is unlikely, and any rally in the second half is anticipated to lack strong conviction [1].
Foley highlights that the Eurozone is more vulnerable to the ongoing supply shock compared to the US, which supports the view that the US dollar remains fundamentally sound [1]. As a result, Rabobank does not expect the market to rebuild long EUR positions to last year’s levels, reinforcing the expectation of a capped EUR/USD rally [1].
No specific market reactions or immediate price movements are discussed in the article. The analysis is forward-looking, focusing on the anticipated limitations to Euro gains and the resilience of the US dollar in the current macroeconomic environment [1].
CONCLUSION
Rabobank expects only a modest upward bias for EUR/USD in the second half of the year, with gains capped by Eurozone growth risks and the ongoing supply shock. The US dollar is seen as fundamentally strong, and a significant rally in EUR/USD is not anticipated.