We think the euro could continue to appreciate against the dollar into the early autumn on expectations for a divergence in policy between the European Central Bank and its US counterpart, but we hold weaker-than-consensus views on the currency’s longer-term performance. Until economic surprise indices turn in the euro area’s favour and the Federal Reserve ends its tightening cycle in a decisive manner, we suspect the exchange rate will have difficulty sustaining levels above the 1.15 threshold.

Economic Surprise Indices