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Economists at Westpac note that the US dollar trend has turned lower as hope over the recovery grows and forecast EUR/USD at 1.14 by year-end. Furthermore, the EU union to launch a stimulus package could lift the pair towards 1.20 by end-2021.

Key quotes

“Given the strength of the sentiment behind it, and in the absence of a clear second COVID-19 wave in key developed nations such as the US, it seems likely that this new US dollar downtrend will persist for the remainder of this year, and well into next.” 

“The euro is expected to rally to USD 1.18 by the end of 2021 after a period of stabilisation late this year near USD 1.14. Behind this move is not only broad–based optimism over the global economy but also the specific progress made within the Euro area to contain the virus and, this month, towards a co-ordinated fiscal package to renew growth.”

“The removal of remaining obstacles to the joint economic stimulus package could boost sentiment such that Euro rises to USD 1.20 or above before end-2021.”