The Euro to Dollar exchange rate (EUR/USD) has only fleetingly traded above 1.10 this year while there has been support just below 1.07.

Nordea expects that EUR/USD will be trapped in a 1.05-1.10 range over the next year.

Central bank policy actions will inevitably be key elements for currencies.

As far as the US is concerned, it notes that recent data has been disappointing and expects that it will take some months before the Fed is comfortable in cutting rates.

In this context, it expects that the first rate cut will not be delivered until September.

Nordea, along with the market, is confident that the ECB will cut interest rates in June.

It notes an important element of uncertainty thereafter, but expects one rate cut per quarter.

The bank expects that the overall US economic performance will underpin the dollar as the Fed adopts a cautious stance.

It also considers a Trump election victory would trigger initial dollar support.

Support is likely to be offset by an improving global economy which will curb defensive support for the US currency.
Looking at the balance of forces, the bank expects that EUR/USD will be trapped in relatively narrow ranges during the forecast period.

Key Quotes:
“We still believe that EURUSD will move largely sideways going forward.”

“We expect a still strong economic performance in the US, lesser rate cuts from the Fed than the ECB in the coming period.”

“Longer out, lower global rates should continue to support economic activity and risk sentiment, lowering the appeal of the USD from a safe-haven standpoint.”
“Broadly speaking, we still see EURUSD range locked between 1.05-1.10 area ahead.”

See live currency exchange rate here.

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