Bank of America Global Research discusses EUR/USD outlook and now targets the pair at 1.12 in Q3 and 1.08 by year-end.

“EURUSD is close to its high for the year. We remain sceptical. The market is long EURUSD and this position could be at risk, particularly for real money. We expect a weak recovery of the global economy during re-opening and don‘t see full normalization as long as the virus is a threat. The EU Recovery Fund is a positive step, but far from a game changer in our view, an 1-off increase in the EU budget that allows the EU to catch up to the fiscal stimulus other G10 economies have been doing–with the US doing more. Although the US recovery may slow in the months ahead, we do not expect another shutdown,” BofA notes. 

“As the market has moved in a different direction from our forecasts, we update our forecasts, marking to market. We now expect EURUSD at 1.12 in Q3 from 1.08 before and 1.08 in Q4 from 1.05 before. We keep our 2021 EURUSD forecast at 1.15.We therefore retain a bearish EURUSD bias, to a large extent because of our positive USD view, which in turn is based on a bearish outlook for the global economy,” BofA adds.