EUR/USD to move back higher to 1.10 around the turn of the year – BMO

Economists at the Bank of Montreal expect EUR/USD to struggle in the near-term but see the pair recovering toward the 1.10 level by the end of the year.

A deeper correction lower in EUR/USD heading toward year-end is not the base case

A deeper correction lower in EUR/USD heading toward year-end is not the base case, but downside risks have increased, particularly with the global trade backdrop looking poor and transatlantic economic divergence set to remain wide for another quarter or so. Closer ties between Russia and North Korea also portend higher levels of geopolitical risk in relation to the war in Ukraine.

The EUR is likely to struggle to maintain topside momentum over the near-term. However, the base case is for moderate EUR/USD strength to push the exchange rate back to 1.10 around the turn of the year.