Earlier post on this is here:
DB has since expanded on their reasoning.
Analysts see 5 points arguing for EUR/USD targeting 1.10 by Q2 and to rise to 1.15 at year end. In summary (very brief summary, but you'll get the idea):
1. The monetary policy cycle favours the euro. A blended metric of 5-year real and nominal rates already points to EUR/USD fair value above 1.10
- The inflation gap between Europe and the US suggests an even further narrowing in rate differentials this year
- More broadly, the relative cycle favours a Fed pivot before the ECB.
2. European flows turning very positive. Given the collapse in gas prices the euro terms of trade have completely unwound the deterioration of 2022 and the end of winter will remove a final source of risk premium in European energy supply.
3. China reopening should also help the euro. The euro is a pro-cyclical currency and turning points over the last decade have coincided with a turn in the external growth cycle
4. The market is sitting very long USD cash. ... dollar overvaluation across PPP, interest rate differentials and global growth metrics
5. The dollar has historically not weakened while a high-yielder. Inflection points have historically also required a trough in US equities and a shift from US yield curve flattening to steepening. These observations argue against getting overtly bearish on the dollar until the Fed declares mission accomplished, marking a shift from a late-cycle/recessionary environment to growth.
