Wall Street Banks Forecast Euro to Fall Over 3% in Next Year Amid Policy Divergence

On June 29, major Wall Street banks including JPMorgan Chase, Morgan Stanley, and Bank of New York Mellon forecast the euro will decline more than 3% against the dollar over the next year, reaching around 1.10. The euro has already fallen to a one-year low this month, in contrast to its five-year high above 1.20 at the start of the year.

Policy divergence between the Federal Reserve and European Central Bank is driving the outlook. The Fed's new chair has taken a hawkish stance on inflation, prompting market expectations of rate increases, while ECB President Lagarde signaled no urgent need for aggressive policy responses. Rising oil prices from Middle East tensions have strengthened the dollar, further weighing on the euro.