Economists at Nordea expect the EUR/USD pair to lose ground toward 1.07 before bouncing back higher.
USD hurt by soft landing outlook
Inflation hurt the US dollar as US interest rate expectations lean towards interest rate cuts rather than interest rate hikes. Declining inflation has also raised risk sentiment. This was not helpful for the USD, a traditional safe haven, which benefits from risk-off.
The USD is likely to perform again when the probability of a soft landing fades and risks of higher interest rates for longer prevail.
Our three-month forecast has EUR/USD trading back down at 1.07 before pulling higher.
