BofA Expects EUR/USD to Stay Under Pressure Through Q3 as Fed Supports Dollar

Bank of America expects the euro to weaken against the U.S. dollar through the end of the third quarter, with U.S. monetary policy and economic conditions providing near-term support for the greenback.

According to the bank, stronger U.S. economic data has reinforced expectations that the Federal Reserve could maintain a more hawkish policy stance. This outlook may keep demand for the dollar elevated and limit the euro’s ability to gain ground against the U.S. currency.

Higher oil prices are another factor that could support the dollar in the short term. Bank of America believes this combination of relatively firm U.S. data, tighter Federal Reserve expectations, and stronger energy prices could keep EUR/USD under downward pressure during Q3.

The outlook could change after the third quarter. BofA expects the U.S. dollar to weaken once Federal Reserve interest-rate increases are more fully reflected in market pricing and oil prices begin to move lower.

A softer dollar environment after Q3 could potentially provide some support for EUR/USD, although Bank of America did not provide a specific exchange-rate target for the currency pair.

EUR/USD remains one of the most actively traded currency pairs in the global foreign exchange market, making changes in Federal Reserve expectations, U.S. economic data, energy prices, and broader dollar sentiment particularly important for traders following the pair.