Credit Agricole sees EURUSD at 1.05 by 4Q24

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Credit Agricole expects EURUSD to hit 1.05 by the end of the year.

They based their call on a couple of different drivers:

  • Even though they expect both banks to cut rates in 2024, they think the ECB will ease much more aggressive than the FOMC
  • If the Fed opts to use QT tapering which might require less cuts
  • The bank sees a plausible recession in the US, and according to their analysis the EURUSD tends to push lower on the onset of US recessions.
  • Wider peripheral spreads in 2024 could also add pressure on the EUR
  • A Trump victory could reintroduce trade uncertainty which is expected to support the USD and pressure the EUR
  • The bank also thinks that next week’s ECB decision could add to downside for the single currency if the ECB pre-announces a June rate cut.

I’m more skeptical on whether a pre-announced June cut would change things for the EUR.

When we consider that markets are already pricing in a June cut at 99.5% probability and already pricing in 90 basis points of cuts for the year, I don’t see a confirmation of a June cut as changing much.

ECB rate probabilities