Analysts at MUFG Bank forecast the EUR/USD pair will end the second quarter around 1.2000, the third quarter at 1.2200, and the fourth at 1.2400.

Key Quotes:

“After the sharp fall in Q1, EUR/USD rebounded sharply in April, by 2.5% reflecting the renewed optimism over the outlook for growth. We see this as being more sustained now given the vaccination roll-out appears set in stone and the infrastructure and supply likely to see a quicker return to normal.”

“The dramatic turnaround in the vaccination outlook will potentially mean a faster and stronger rebound in economic growth. This is not largely priced into EUR now we believe.”

“We believe there is scope for the euro-zone equities markets to perform better going forward. There is a considerable performance gap that could close somewhat – the Euro Stoxx 600 is just 1.4% above its pre-COVID high in contrast to 23.5% for the S&P 500.”

“While we have argued PEPP was not EUR negative in that it reduced fragmentation risks, slowing the pace in Q3 without market disruption ahead of the Fed would reinforce optimism in the recovery.”

“We under-estimated the speed in which optimism would lift the euro and hence have adjusted our levels back higher and maintain a view of EUR appreciation in the region of 3-4% over the forecast period.”