The EUR/USD Currency Pair Analysis and Forecasts for 2024

After a couple of disappointing years, the Euro gained some value by the end of 2023. In the last 12 months, it has appreciated by 2.59% against Dollar. However, the current year’s Q1 has been a mixed time so far with a -1.37% YTD.

The EUR/USD is currently trading at 1.0816 after starting from a relatively higher point of 1.1047. The dip has largely been due to a stronger Dollar performance amid the US Federal Reserve’s continued higher interest rate policy.

Most experts predict a competitive year for Euro, but the forecasts are not too optimistic as the Eurozone faces several challenges (discussed below).

The pair has remained in the range of 1.1047 to 1.0709 in Q1 2024 and is likely to close around the 1.09 mark.

The euro started to regain some value by the end of 2023 and in the early days of 2024 due to a weakening Dollar. However, the FED’s hinting at keeping the interest rates steady, US economic data indicators, and some other factors meant the Dollar held its ground.

Many consider the US Dollar to be overvalued and anticipate a market correction in 2024. However, the US Dollar is likely to remain in demand by investors throughout the year and thus remain high against the Euro.

Despite several anticipating aggressive interest rate cuts, some believe the market has already absorbed that factor. Also, the US economy has proven to be resilient in the past couple of years in the post-pandemic era as compared to the European economies.

Even if the US Dollar weakens to its fair market value, several factors favor its high demand in the coming months. Usually, when investors do not find attractive global assets, they tend to rally behind the US Dollar as a safe haven.

Thus, despite market corrections, a presidential election, FED’s interest rate cuts, and global economic factors, the US Dollar is likely to hold its current position largely.

The EUR/USD currency pair’s performance depends on both economies and some global factors.

Both the European Central Bank (ECB) and The US FED are likely to start interest rate cuts. However, the impact will be drastic for Euro as compared to the US Dollar as the US economy has shown better results.

The US will hold its presidential elections in 2024 which may see a change in the command. Several European countries are due for their parliamentary and presidential elections as well.

However, more important factors are their regional economic indicators respectively. As evident from the data, the US economy has shown better results as compared to the Eurozone economies.

It means the balance remains in the favor of the US Dollar and the trend is likely to continue in 2024.

Another key challenge for the Euro is to withstand two regional wars involving Russia-Ukraine and the Middle East conflict. Both these wars mean a supply chain and energy crisis for the Eurozone particularly.

European economies have seen sluggish recoveries in the post-pandemic era too. A slowing regional economy and unfavored fiscal policies mean the Euro is unlikely to outperform the Greenback in the short term.

A conservative consensus will be to think the US Dollar will remain stronger against the Euro for most of 2024. However, some experts suggest that the market will enforce its long overdue correction as the Dollar has remained overvalued for a long period.

Overall, we can expect a volatile and uncertain year for both currencies where the EURO may regain some value, but the Dollar is likely to stay on top in the long term.