DBS FX analysts Philip Wee and Chang Wei Liang EUR/USD likely to move into higher 1.10-1.15 range by 2025

Entry into the higher range of 1.10–1.15 by 2025

“The European Central Bank (ECB) is unlikely to keep pace with the Fed’s rate cuts. By the end of September, the ECB’s deposit rate was 150 basis points above its 2% inflation target, compared to the Fed’s policy rate of 275-300 basis points.”

“The ECB has estimated an inflation-adjusted neutral interest rate of 1-2%, which is higher than the Fed rate of 0-1%. The basis for easing the ECB’s monetary policy is the expectation that inflation will decline in the face of record low unemployment. “But the Fed is cutting interest rates to prevent a further cooling of the labor market – something it deems unnecessary to achieve its inflation target.”