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Analysts at MUFG Bank consider the EUR/USD pair will rise during 2021. At the same time, they warn that the strong upward momentum for EUR/USD suggests risks of some correction on a short-term horizon. They forecast the pair is to trade at 1.23 by the end of the first quarter and at 1.28 by the end of the year. 

Key Quotes:

“The outlook for this year will be dominated by a number of key themes but certainly the path COVID takes over the short-term looks set to limit the upside for EUR/USD. The new strain of the virus has escalated the extent of restrictions and vaccine roll-outs have been very slow, which will have implications for growth over the short-term. Asset prices quickly adjust to changing circumstances, but the strong upward momentum for EUR/USD suggests risks of some correction over the short-term. We assume though that investors’ willingness to look beyond this near-term risk, helped by huge policy support, will limit the downside for EUR.”

“While COVID challenges will persist for some months yet, we assume investors will look to a brighter second half of the year, which will limit EUR/USD downside. As COVID risks recede and growth in Europe picks up, we see scope for further gains this year, albeit in percentage terms, less than the gain recorded in 2020.”