Euro-Dollar Will Struggle: Corpay
- Written by: Sam Coventry
Image © European Central Bank.
The euro will struggle to progress higher against the dollar this year, warns a leading market analyst.
Karl Schamotta, Chief Market Strategist at Corpay, says the market is overestimating the euro's ability to rise against the dollar, which would defy consensus expectations.
"In our view, absent a surprising and self-sustaining rebound or move toward stronger fiscal coordination, any euro gains are likely to be narrower and more brittle this year, with risks more two-sided than markets currently assume," he explains.
Corpay also expects the dollar to do better than most analysts expect on account of better than expected U.S. growth outturns.
"Should U.S. growth and monetary policy views reprice in a hawkish direction over the coming months—as we expect—rate differentials may remain wide, keeping the common currency under pressure longer than the consensus expects," he says.
Consensus anticipates another year of U.S. dollar underperformance on account of a slowing U.S. economy and a series of interest rate cuts.
This would lead to dollar devaluation against currencies belonging to central banks where rates are left on hold, as is the base-case expectation concerning the European Central Bank.
The euro to dollar exchange rate (EUR/USD) rose 13.36% last year, from 1.0354 to 1.1738, where it traded on its launch on January 04 1999 (1.18).
"Against the dollar, the euro sits almost exactly where it began when the currency launched in January 1999, and the case for a new rally in 2026 looks flimsy," says Schamotta.
