Analysts: Euro will continue to fall against the dollar in 2024

The euro earlier this year faced its worst January since 2015, falling 2.2 percent against the dollar, and further depreciation is likely, according to investment banks Rabobank and Credit Agricole.

"The euro should be the currency with one of the weakest developments in the G10, in 2024", says, quoted by poundsterlinglive.com, Valentin Marinov, head of the currency strategy department at Credit Agricole.

The current forecast is at odds with the consensus in the analyst community since early 2024, which saw the dollar depreciating over the course of the current year, allowing for a steady recovery in the euro.

However, the dollar has been the best-performing currency so far in 2024. The euro's losses extended after the chairman of the Federal Reserve (Fed - US central bank), Jerome Powell, recently said that the institution will took a cautious approach to cutting interest rates. Fed officials are all but certain to leave interest rates unchanged in March, disappointing a market that only two weeks ago was considering a cut. This, while in the Eurozone, the European Central Bank (ECB) is expected to cut the cost of borrowing.

Moreover, the dollar was supported by the release on Monday of an ISM survey showing a solid recovery in the employment situation in US companies.

• Rabobank: "It is unlikely that the Fed will cut interest rates before June"

Economists at Rabobank say the Fed is unlikely to start cutting interest rates before June, and the dollar will only start to moderate from then. Rabobank maintains a forecast for the euro at $1.07 in one month and a target of $1.05 in three months.

Credit Agricole argues that the bearish outlook for the euro against the dollar is not just a function of Federal Reserve policy, but reflects the expectation that the ECB will match and even exceed the number of Fed rate cuts in 2024.

Consequently, notes the cited source, this could turn the euro into an attractive financing currency.

In addition, bond yields issued by peripheral eurozone countries will rise much faster than Germany's. This widening of yield spreads is expected to accelerate as the ECB's quantitative easing program accelerates and puts pressure on the euro's attractiveness.

Credit Agricole also expects markets to be more risk averse in the second half of the year due to the cloudier outlook for economic growth and political uncertainty in the US.

Corroborating these factors, Credit Agricole estimates a euro rate of 1.07 dollars by the middle of the year and 1.05 at the end of the year. According to Credit Agricole, deteriorating global growth prospects and political uncertainties in the US could drive investors to the dollar as a safe haven, especially in the second half of 2024.

The euro was trading at $1.0772 yesterday at 14:00 local time, up 0.2% from the previous day.