The US Dollar (USD) has been the clear outperformer so far this year. Economists at Danske Bank maintain their strategic case for a lower EUR/USD in the medium term.

Robust US fundamentals to continue supporting the USD

We maintain the strategic case for a lower EUR/USD based on the relative terms of trade, real rates, and relative unit labour costs. Hence, we expect a downward trajectory over the course of the year. In the near term, we like to sell the cross on rallies. 

Although our forecast for the Fed and the ECB suggests upside risk to EUR/USD in H1, we stress that the broader market pricing in G10, which we believe is too aggressive for cuts, could prove to be more crucial for EUR/USD.