Euro 2024 Forecasts

In 2023, the Euro emerged as one of the better-performing currencies, experiencing losses only to fellow European currencies from Switzerland, the UK, and Sweden.

The superior performance of the European basket is probably a consequence of alleviating the highly negative sentiment prevalent in 2022, especially as concerns related to gas supply diminished.

However, the year concludes on a somewhat subdued note, marked by underperformance against the majority of the G10. This is attributed to investors heightening expectations for European Central Bank actions in response to declining Eurozone inflation and an extended period of lackluster economic performance.

In 2024, the focus will revolve around the timing and extent of interest rate cuts by global central banks. Currencies associated with those institutions implementing early and aggressive rate cuts are expected to face significant challenges.

As a result, your perspective on the Euro in 2024 is contingent on where you place the European Central Bank along this timeline.

Morgan Stanley

Morgan Stanley's strategists are taking a short position on Euro-Dollar in 2024, foreseeing a technical recession in the eurozone. They anticipate the European Central Bank (ECB), Sweden, and the UK to spearhead the central bank cutting cycle.

"Uncompelling growth and falling rates weigh on these currencies, with EUR/USD returning to parity by 1Q24 and staying around the 1.00 level for most of the year," says Morgan Stanley.

This projection positions Morgan Stanley in contrast to the consensus, which anticipates Euro-Dollar to gradually appreciate over the upcoming months.

Danske Bank

According to a year-ahead outlook briefing from Danske Bank, the Euro to Dollar exchange rate has the potential to climb to 1.11 before entering a multi-month decline.

"Look to buy on dips in the near-term," Stefan Mellin, Chief Analyst for FX Strategy at Danske Bank, stated. "In the near term, we still see good opportunities for USD weakness on the back of the considerable easing of financial conditions over the past month, in conjunction with bearish USD year-end seasonality."

But, "looking further ahead, it looks like European investors will still have to pay to hedge their USD FX exposure next year, although the cost has fallen and may fall further next year on the Fed cutting policy rates first," says Mellin.

Danske Bank maintains a strategically bearish stance on EUR/USD, foreseeing the pair declining to 1.10 in three months, 1.07 in six months, and 1.05 in twelve months.

Concerning the Euro-Pound exchange rate, Danske Bank suggests that inflation in the UK is not expected to evolve significantly differently than for peers. Therefore, the Bank of England cutting cycle is not anticipated to be substantially different.

Danske Bank aims for an increase in EUR/GBP to 0.89 within the next 6-12 months.

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HSBC

HSBC's forecasts indicate that Euro-Dollar is expected to trend lower, given the possibility that the Federal Reserve and other central banks might not be able to implement monetary policy easing to the extent anticipated by the markets.

Consequently, HSBC cautions that markets have already shown a considerable amount of optimism, and the challenges for this sentiment to be sustained are now even greater.

"A number of scenarios, including a potential US soft landing, still point to a strong USD, but only a global soft landing delivers a clear dollar bear case," stated by Daragh Maher, Head of Research for the Americas at HSBC.

HSBC's projections anticipate Euro-Dollar to be at 1.06 by the end of the first quarter of 2024, below the current spot level of 1.0950. Further forecasts include 1.04 by mid-2024, 1.02 by the end of the third quarter, and a continuation of 1.02 by the year-end.

Amundi Asset Management

Amundi, Europe's largest asset manager, predicts consistent gains for the Euro-Dollar in 2024.

In a year-ahead outlook note, Amundi suggests that the mild U.S. recession, an expected base case for the first half of 2024, may not have as positive an impact on the USD as observed in the past.

Amundi predicts the Euro-Dollar to be at 1.09 by mid-year, aligning with the consensus forecast of 1.09. Additionally, they project a rise to 1.15 by the end of 2024, surpassing the consensus at 1.11.

A substantial risk for those taking a bearish stance on the Euro in 2024 is the potential for a steadfast European Central Bank that declines to align with market expectations and implement interest rate cuts.

Crédit Agricole

Crédit Agricole, the French banking giant, asserts that Eurozone inflation will persist above 2.4% until the conclusion of 2025, and they do not anticipate a recession in the Eurozone.

"In this context, we believe that the ECB will have to remain hawkish for most of 2024," says Crédit Agricole. "We think the first rate cut will take place in September 2024".

This forecast falls significantly short of external market expectations and introduces noteworthy upside risks to the Euro if proven accurate.

Nevertheless, Crédit Agricole's internal FX forecasts depict a relatively mild trajectory for the Euro, with EUR/USD expected to be at 1.07 by midyear and 1.05 by year-end. For EUR/GBP, the projections are 0.85 and 0.84, respectively.