BofA stays long USD into Q3, sees EUR/USD at 1.12
Bank of America recommends staying long the US dollar into the third quarter, forecasting EUR/USD to fall to 1.12 on expected Fed rate hikes and resilient US growth.
Bank of America has reiterated its bullish stance on the US dollar into the third quarter, advising investors to maintain long USD positions against the euro. The bank forecasts EUR/USD to decline to 1.12 in Q3 before recovering to 1.15 by end-2026, down from its previous forecast of 1.20.
The bank's recommendation is underpinned by expectations of three additional Federal Reserve rate hikes this year, which would widen interest rate differentials in favor of the greenback. Resilient US economic growth, partly supported by artificial intelligence-driven investment, further bolsters the dollar's appeal. For forex traders, this suggests a continued advantage for carry trades long the dollar, as higher US rates increase the yield pickup relative to other major currencies. Traders can monitor real-time EUR/USD quotes on NowPrice to track the pair's movement against the bank's targets.
Looking ahead, the key driver will be the pace of Fed tightening and any signs of divergence from the European Central Bank. If the ECB maintains a more dovish stance, the interest rate differential could push EUR/USD even lower than BofA's 1.12 forecast. Traders should also watch US economic data releases, particularly inflation and employment figures, which could influence the Fed's rate path. The narrowing gap between US and global economic performance remains a factor to monitor for any shifts in the dollar's momentum.