US Dollar should weaken later in the year – Erste Group

Fed will lower interest rates earlier than the ECB, arguing for continued weakening of the USD later in the year , in the opinion of economists at Erste Group Research.

EUR/USD to move sideways for the time being

“For the US, it is unclear how the recent bank failures will affect lending and thus economic activity and inflation. For the ECB's monetary policy, the decisive factor will be when a slowdown in core inflation will be seen, which is also uncertain.”

“We expect EUR/USD to move sideways for the time being, as there is no clear advantage for either currency. However, this should be followed by a slow weakening of the Dollar. This is because we assume that due to the very high interest rate level and the progress in fighting inflation in the US, the Fed will lower interest rates earlier than the ECB. This will make the USD relatively less attractive, which argues for a continued weakening of the US currency later in the year.”