Currency
December 14, 2023
5
min read
Pangea's 2024 Euro Forecast and Analysis
Europe's economy has slowed under high interest rates in 2023, & is likely to have additional challenges in 2024. Here is Pangea's technical EURUSD forecast & analysis.
Bill Henner
Europe's economy has slowed under high interest rates in 2023, & is likely to have additional challenges in 2024. Here is Pangea's technical EURUSD forecast & analysis.

Europe's economy has slowed under high-interest rates in 2023 and is likely to have additional challenges in 2024. Here is Pangea's technical EURUSD forecast & analysis:

The euro spent 2023 seesawing within a wide range as the dollar consolidated its historic gain from 2022. The primary force that drove the dollar rally was the US central bank’s aggressive increase in interest rates to curb inflation. With inflation receding globally, markets are now anticipating interest rate cuts from the major central banks. According to the CME Group Fedwatch tool it is likely that the FOMC will lower rates as soon as March, and it is expected that other central banks (including the European Central Bank) will follow suit.

Forex traders and market followers know that FX pairs express the relative value of one currency against another. Picking which currency will gain at the expense of the other is very often a matter of a choice between two inherently flawed entities. A well-known adage in FX says that “trading currencies is like choosing the cleanest shirt in a bag of dirty laundry”.  So, will the euro turn out to be that cleanest shirt, or will the dollar and other currencies prevail in 2024?

Current State of the European Economy

What’s Next for the Euro: Forecasting

The euro’s 2024 trajectory will largely depend on the eurozone’s economic performance compared to other major economies.  During the last 20 years, the euro (EURUSD) has fluctuated from a low of 0.96 to a high of 1.60, with an average price of approximately 1.24. Its current level of 1.08 implies that it is undervalued compared to its historic average.

The euro is unique among major currencies in that it is a single currency used by 20 countries. Managing the needs of 20 disparate economies has always been challenging for the European Central Bank, and the system has experienced regular periods of stress due to differing economic conditions in the member states. This situation makes monetary policy difficult since there is rarely a “one size fits all” solution. ECB President Lagarde will have to navigate the complexities of trying to control persistent inflation while maintaining economic growth in all EU countries.

The European economy (GDP) is expected to grow 1.6% in 2024, while the US will likely expand 2.1%. The stronger US economy means that US interest rates should remain at higher levels than those in Europe. This is a major factor in keeping the dollar strong against the euro.

The relative strength of the US economy should cause a weakening in the euro, but other factors could affect the exchange rate. Any expansion of the Ukraine conflict, especially if other European countries become involved, could lead to FX market flows out of the euro. Higher energy prices could also weigh on the euro. Conversely, if oil and natural gas prices drop, that would most likely benefit the euro. 

Technical Picture of Euro: Technical Analysis

2023’s range in EURUSD shows the lowest volatility since 2019. Factors such as the pandemic, the Ukraine crisis, and global inflation contributed to bigger swings in the period from 2020 through 2022. 

Analysts at major financial institutions have mixed assessments for EURUSD forecasts in 2024. Most expect a modest rise over the year. Morgan Stanley and Deutsche Bank forecast a year-end price of 1.15, while Bank of America expects the pair to end at 1.10. Few expect dramatic movement, with many predicting prices to be contained by 2023’s range of 1.0444 to 1.1275.  A breakout above or below that range would imply a test of longer-term support or resistance areas shown in this chart:

Pangea believes that the most likely outcome in 2024 will be a gradually weakening EURUSD as the US economy outpaces the eurozone throughout the year.

FX pricing is notoriously difficult to predict. Unanticipated events, either economic or geopolitical, could cause a dramatic spike in volatility and push EURUSD to or even through the long-term support or resistance areas. Companies that are exposed to risk on either side should consider the appropriate hedging strategies to mitigate that risk.

And while hedging FX risk can be a complex process, that doesn’t have to stop your business from protecting a current position or currency transaction, whether you’re trading EURUSD or other currency pairs.

Pangea was created to provide simple access to hedging for companies who lack the resources to do it alone. Pangea’s platform helps you hedge FX risk, strategically manage your global FX accounts, and deliver FX payments virtually anywhere in the world. With Pangea, you can manage your FX all from one single platform. 

Pangea uses Ai to put the same powerful strategies and tools used by Fortune 500 companies, such as financial derivatives and hedging instruments, in the hands of your treasury and finance team.

Schedule a demo today and see how you can protect your positions and currency transactions in just a few clicks.

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