EUR/USD to suffer more downward pressure to 1.12 over next year – SocGen

Economists at Société Générale expect the EUR/USD to temporarily depreciate towards 1.12 over the next year. However, the world’s most pupular currency pair is set to stage a rebound in the medium-term.

Yields to rise but to remain subdued

“Bund yields should increase, printing in positive territory next year, mostly due the recovery, higher inflation and ECB tapering.”

“The normalisation of US rates will impact European rates too. We target 0.2% for 4Q22, which is still a subdued level.”

“The EUR remains largely undervalued compared with the USD (GDP PPP at 1.41).”

“Medium-term, we expect the EUR/USD to appreciate. But we see it depreciating from 1.15 to 1.12 next year, due to quicker changes from the Fed.”