The window of Dollar strength should mean EUR/USD moving close to parity – MUFG

The Euro is approaching lows of the year. Economists at MUFG Bank analyze EUR/USD outlook.

USD upside risks over the short term but depreciation should unfold in 2024 

The global growth backdrop is set to remain conducive to continued Dollar strength this quarter before Dollar depreciation sets in from Q1 2024 as the evidence of slower US economic growth builds and pricing for rate cuts increases.

We see a window for further Dollar strength that could take EUR/USD back toward parity. A November FOMC rate hike (not our view) would reinforce strength although we do not expect a break back below parity.