BofA cuts euro forecasts, sees stronger dollar in – Money News
Investing.com — Bank of America has revised its G10 foreign-exchange forecasts for the second half of 2026, decreasing its euro-dollar projections and adopting a more constructive near-term view on the U.S. dollar as resilient U.S. financial information and a hawkish Federal Reserve proceed to assist the buck.
The bank now expects EUR/USD to finish the third quarter at 1.12 and end 2026 at 1.15, down from its earlier forecasts, whereas sustaining that the dollar ought to weaken solely reasonably over the medium time period. It additionally revised forecasts throughout a number of dollar-bloc currencies to replicate expectations of a comparatively stronger U.S. currency.
BofA stated foreign-exchange markets have been pushed by developments surrounding U.S.-Iran relations and expectations for financial coverage below Federal Reserve Chair Kevin Warsh. While easing geopolitical tensions have lowered stress on oil markets, stronger-than-expected U.S. financial information and hawkish Fed communications have pushed the dollar greater, with the bank anticipating that trend to proceed in the close to time period.
The bank believes relative financial efficiency and the prospect of further Fed tightening may weigh on the euro by the summer time. It expects U.S.-euro space growth divergence to peak in coming months earlier than euro-area growth improves later in the yr, supported by German fiscal stimulus and decrease power costs.
BofA now forecasts EUR/USD at 1.12 by the top of the third quarter and 1.15 by year-end, in contrast with a earlier end-Q3 forecast of 1.15. It expects the pair to get well steadily as euro-area growth strengthens and U.S. growth slows, whereas its end-2027 forecast has been lowered to 1.20 from 1.25.
Elsewhere, the bank made solely minor modifications to its near-term forecasts for the Japanese yen and British pound however adopted a more dollar-positive stance towards commodity-linked currencies. It raised its USD/CAD outlook, citing decrease oil costs and expectations that the Bank of Canada will stay on maintain even because the Fed seems poised for additional tightening, whereas additionally decreasing its AUD/USD forecast profile.
BofA sees continued U.S. financial outperformance and any renewed escalation in tensions with Iran as upside dangers for the dollar, whereas weaker U.S. information that scale back expectations of Fed charge hikes would pose draw back dangers.
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