EUR/USD to move downward to 1.05 amid prolonged dollar strength – BofA

The US dollar is set to become potentially stronger for a bit longer, according to economists at Bank of America Global Research, who maintains a bullish bias on the USD over the coming weeks. 

Hawkish Fed tone amid high inflation risks to supporting USD for a while longer

“Initiation of Fed hiking cycles has typically not boded well for USD prospects, but a hawkish Fed tone amid high inflation risks could end up supporting the dollar for a while longer if terminal rate expectations continue to rise against backdrop of persistent risk aversion and high commodity prices related to the war in Ukraine.” 

"We recently downwardly-revised our EUR/USD forecast to 1.05 and continue to see downside potential over a short to medium-term horizon. However, downside risks should be contained absent a severe energy-shock-related recession in the euro-area preventing ECB normalization; or, alternatively, upside risks to the already-severe US inflation problem.”