Societe Generale’s Kit Juckes asserts that the EUR/USD currency pair is expected to remain range-bound due to the interplay of geopolitical risks and uncertainty surrounding US policy, which are counterbalancing economic fundamentals [1]. Juckes highlights that two-year rate differentials suggest EUR/USD should be trading near 1.14–1.17, and consensus GDP forecasts also point to 1.14 as an appropriate level [1]. This aligns with Societe Generale’s previous end-year forecast for the pair before recent complications arose [1].
However, Juckes notes that former President Trump’s preference for a weaker US Dollar and lower interest rates, regardless of growth and inflation dynamics, is exerting downward pressure on the Dollar [1]. He observes that whenever market optimism reduces expectations of further escalation in geopolitical tensions, the Dollar tends to weaken, increasing the likelihood of EUR/USD reaching 1.20 again in the coming weeks [1].
Juckes also remarks that risk aversion is likely to keep FX volatility subdued and G10 currency pairs, including EUR/USD, trading within tight ranges [1]. Despite the current range-bound outlook, the potential for a generally weaker Dollar remains if policy and geopolitical risks subside [1].
CONCLUSION
Societe Generale anticipates EUR/USD will remain in a tight range due to ongoing policy and geopolitical uncertainties. However, a shift towards a weaker Dollar is possible if market optimism increases, with EUR/USD potentially returning to 1.20 in the near term.