Economists at Rabobank do see scope for a correction in EUR/USD in the current quarter. But beyond a correction, it would seem unlikely that market sentiment will turn decisively in favour of the USD until real interest rates become more attractive.
“In view of the uncertainly about the news around COVID-19, the various restrictions, the vaccine roll-out and indeed the degree and effectiveness of any fiscal policy responses, there is every reason to suspect that volatility in EUR/USD could be high in the coming months.”
“While we are looking for a pullback in EUR/USD in Q1, the weakness of real interest rates should be sufficient to keep the USD on the back foot through most of the year and we will be looking for any changes of this front before calling for a broad-based, sustained USD recovery.”
Credit: FX Street