Investing.com – The Federal Reserve has begun a cycle of interest rate cuts, and Bank of America Securities continues to predict a moderate decline in the U.S. dollar through 2025.
“Although the Fed modestly surprised markets with a 50 basis point cut last week, we expect fundamental currency dynamics across the G10 to remain largely unchanged and the upward trend to continue,” Bank of America Securities analysts said in a Sept. 26 note.
The Bank views the US dollar as moderately overvalued, but the Federal Reserve’s rate-cutting cycle is likely to facilitate further mitigate this overvaluation in the medium term, which also applies to our EUR/USD upside forecast.
“We expect EUR/USD to continue its recent gains, with our unchanged forecast for 1.12 by the end of 2024 and 1.17 by the end of 2025,” BoA said.
The bank said the dollar’s decline is likely to continue as disinflationary trends and a weakening labor market support a slightly faster pace of interest rate cuts by the Fed.
The BoA expects another 50 basis point cut at its November meeting and a 25 basis point cut in December.
At 10:00 ET (14:00 GMT), EUR/USD was up 0.1% to 1.1142, up about 1% year-on-year.
