EUR/USD to slump if some of expected rate hikes by the ECB are priced out – ABN Amro

Economists at ABN Amro expect the European Central Bank (ECB) to disappoint markets while the Federal Reserve (Fed) is set to meet market expectations. Therefore, the EUR/USD pair should extend its decline.

Outperformance of the US economy to have a downward effect on EUR/USD

“Our views of the Fed are roughly priced in by the market but our view on the ECB is for less aggressive monetary policy tightening than financial markets now expect. If some of the expected rate hikes by the ECB are priced out, the euro will likely decline.”

“The outperformance of the US economy compared to the eurozone economy should also have a downward effect on EUR/USD.”