EUR/USD
The dollar remained stable against the euro over the summer despite the conflict in Iran, higher oil prices and a more hawkish Fed, partly thanks to positive surprises on the other side of the Atlantic, including stronger-than-expected GDP growth despite the energy shock. Meanwhile, the US economy remains resilient, although a reacceleration in consumer spending over the coming quarters looks unlikely. Looking ahead, we continue to expect a gradual depreciation of the dollar, supported by the euro area's relative cyclical improvement, with fiscal stimulus yet to be fully deployed, and by an interest-rate path that we expect to be more favourable to the euro than markets currently price in. Added to this are the well-known structural vulnerabilities of the US economy, namely its large fiscal and external deficits, although the dollar's pre-eminent status in the international monetary system remains largely intact.
