At Any Rate
Global FX: 1.20 on EUR/USD and euro bloc + model take-aways
Apr 25, 2025
James Nelligan, a Global FX Strategist at JPMorgan, shares insights on the recent surge of the EUR/USD to 1.20. He discusses how U.S. economic trends and Europe's fiscal policies are shaping currency valuations. The conversation shifts to the UK's fiscal challenges and the impact of rising defense spending in the eurozone. Nelligan highlights the complexities of currency ratings, the strengths and weaknesses of the euro amidst market volatility, and the balance of optimism and caution in the euro's future.
15:55
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Quick takeaways
- The recent rise of the EUR/USD to 1.14-1.16 was driven more by US dynamics than initially expected Eurozone factors.
- Short-term models suggest the euro is overvalued, yet a long-term bullish outlook persists amidst challenges faced by the British pound.
Deep dives
Recent Developments in Euro Dollar Strength
The euro dollar has recently surpassed projected high targets, with a rise to values between 114 and 116 occurring more rapidly than expected. This strength contrasts with initial predictions, which leaned towards factors from the Eurozone driving the currency's movement; instead, US dynamics played a more significant role. Despite these recent gains, short-term models indicate that the euro dollar is overvalued at the current levels around 113 to 113.50 with fair value closer to 110.50. Analysts believe that while near-term challenges may exist, a bullish outlook remains justified due to ongoing US moderation in fiscal policy, which could lead to a weaker dollar over time.
