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The Russian currency will face difficult challenges in the coming months. The end of the Central Bank’s tight monetary policy, a decline in monetary exports and a possible change in Russia’s political priorities after the presidential elections could be potential factors putting pressure on the Russian currency. The Bank of Russia’s forecast for a reduction in the country’s trade balance and current account indicates expectations of expanding sanctions or tightening measures to comply with existing restrictions.
The Russian government continues to maintain strict control over foreign exchange turnover. Russia’s largest exporters are required to sell almost all foreign currency received, a measure planned to remain in place until the end of April. In addition, this year the Russian Central Bank resumed foreign currency sales as part of the fiscal rule and NWF investments, but this could not prevent the recent weakening of the ruble against the dollar. The forecast for the euro exchange rate against the ruble in 2024 directly depends on the main currency pair.
The future of the ruble and dollar in 2024
What will happen to the ruble and yuan in 2024?
EUR/USD Key Points
After a quiet 2023, EUR/USD is likely to see more volatility in 2024. Stronger economic growth in the US and similar inflation on both sides of the Atlantic could lead to more aggressive interest rate cuts by the ECB, pushing EUR/USD higher.
Despite some volatility throughout the year, it can be said that 2023 was a relatively memorable year for the world’s most widely traded currency pair. By mid-December 2023, EUR/USD was trading just a couple hundred pips higher, or about 2%, from the 1.0699 level where it started the year. Moreover, for the entire year the pair showed a range of just 828 pips, which is the second lowest range since the introduction of the euro in 1999. Using interpolated prices based on national currencies before, the 2023 range would be the third lowest in the last 50 years!
The clearest trend for EUR/USD in 2023 was a significant drop in the third quarter from above 1.12 to below 1.05 amid a narrative of “US economic exceptionalism” or the theme that the world’s largest economy is easily outperforms and differentiates itself from other competitors in the developed market. Not surprisingly, this theme changed in the fourth quarter, when economic data in the US slowed and began to catch up with the rest of the world, including the European continent.
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EUR/USD Fundamental Analysis
When it comes to the fundamental outlook for the EUR/USD pair in 2024, the most important topic will be the reduction of central bank interest rates.
After the final central bank meeting of 2023, traders believe that both the US Federal Reserve and the European Central Bank have reached peak interest rates and will cut interest rates in the first half of 2024. The key question for EUR/USD traders will be which central bank will cut interest rates the most, or more specifically which central bank will cut interest rates the most relative to expectations.
Conveniently, expectations for both central banks are relatively similar. Traders are forecasting around five or six interest rate cuts from both the Fed and the ECB, with easing cycles expected to begin as early as March. Although much will ultimately depend on how economic data develops. Basic economic analysis suggests that the odds are skewed towards more interest rate cuts from the ECB than from the Fed, and therefore increased odds that EUR/USD could fall in 2024.
Simply put, economic growth is likely to be higher and more resilient in the US than in the eurozone, and inflation, the bugbear that both central banks are trying to combat, should be the same on both sides of the Atlantic. Starting with economic growth, the Organization for Economic Co-operation and Development (OECD) projects the US economy to grow 1.5% and 1.7% in 2023 and 2024, respectively, roughly in line with the OECD average. In contrast, Germany, France and Italy, the eurozone’s three largest economies, are expected to grow by less than 1% in 2024 and 1.2% in 2025, leaving the entire eurozone at risk of slipping into recession in case of any negative consequences. shocks arise:
The OECD predicts that after peaking in 2022, price pressures in the eurozone will keep pace with pressures in the US, gradually decreasing. Add to this the risks associated with ongoing conflicts in the Middle East and Ukraine, closer to the eurozone, and it becomes clear that the balance of risks is tilted towards the downside of EUR/USD in 2024, especially in the second half of the year.
Euro forecast for 2024
The ongoing energy crisis, economic recovery from the pandemic and lower exports caused by the global economic slowdown are all obstacles to the weak economic growth eurozone. EU economies fell into recession in the second half of 2023, although regional inflation may have peaked. It is possible that the European Central Bank (ECB) will be the first to cut interest rates. If rate cuts are implemented alone, there is a chance that it will be done too early, damaging the euro.
However, at its last meeting in 2023, ECB officials emerged from a mandatory media blackout period to dispel growing rumors that the ECB would be forced to cut interest rates six times next year. The Governing Council believes that rates will remain at current levels for some time before considering lowering them.
One of the reasons ECB officials are opposing rate cuts is that the latest staff forecasts point to a rebound in inflation in the short term, which could lead to markets being able to push for a 150 basis point rate cut in next year. Markets are currently pricing in a 50bp hike. in April and a lower probability of an increase of 25 bps. even earlier, in March.
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Euro-dollar exchange rate forecast for 2024 from major banks
Euro-dollar exchange rate forecast for 2024 from ING Bank
ING’s end-2024 forecast for EUR/USD is 1.15, slightly above the current consensus of around 1.11. Regarding the timing of the trajectory, their current bias is that the strength of EUR/USD will become more evident starting in the second quarter. The dollar traditionally performs well early in the year, and with the eurozone in recession, the first quarter may be too early to see a decisive reversal in EUR/USD.
ING’s forecast for a stronger EUR/USD next year is entirely based on the assumption that US economic growth will slow, inflation will fall and the Fed will be able to make monetary policy less restrictive. The Fed is currently forecast to ease policy by 150 bps starting May/June 2024. This is based on tighter financial conditions finally putting enough pressure on aggregate demand to see US economic growth move closer to a stagnant path. Their team forecasts the US economy will grow just 0.5% next year, versus the consensus forecast of 1.0%.
Forecast of the euro/dollar exchange rate for 2024 from the Bank of Holland
The Dutch Bank predicts that the growth of the eurozone for the whole of 2024 will be only 0.2%. They expect the ECB to ease policy by 75 bps. in 2024, starting in the third quarter. The risk is that the ECB will ease policy earlier and the Fed will ease later.
Euro/dollar exchange rate forecast for 2024 from Morgan Stanley
Morgan Stanley presented forecasts for 2024 for major currency pairs, including EUR/USD. The bank’s forecast was formed by expectations of a technical recession in the eurozone. The bank predicts the eurozone will enter a technical recession, prompting their central banks to begin cutting rates in the second quarter of 2024. Expected weak growth and falling rates are expected to weigh on the euro. The EUR/USD pair is forecast to return to parity (1.00) by the first quarter of 2024 and will remain at this level for most of the year.
Euro/dollar exchange rate forecast for 2024 from Bank of America
Bank of America’s 2024 EUR/USD forecasts confirm it is more bearish versus the US dollar than the consensus forecast, with analysts saying Fed interest rate cuts systems “mean more for the market” than other central banks’ cuts. BofA forecasts that the Euro to Dollar (EURUSD) exchange rate will reach 1.10 in the coming months and rise to its fair value. However, analysts warn that this does not necessarily mean that “the euro will receive support on its own.” The dollar’s upcoming weakness will be driven by expectations that U.S. economic growth will “land” and create a smaller gap in U.S. productivity relative to other countries as part of the “U.S. economic recovery.”
Euro to dollar exchange rate forecast for 2024 from Commerzbank
Commerzbank analysts forecast the euro/dollar exchange rate (EUR/USD) to strengthen to 1.12 by June 2024 before falling to 1.08 by March 2025. The bank still expects the US economy to fall into recession in 2024, and the Fed will respond by cutting its key interest rate by a total of 150 bps. However, as the market remains confident that the US economy will achieve a soft landing, they are forecasting EUR/USD to rise to around 1.12.
Euro to dollar exchange rate forecast for 2024 from Goldman Sachs
Goldman Sachs doubts US bond yields will continue to decline in the short term and added: “In particular, we continue to think that for the foreign exchange market it will be difficult to further erode the dollar’s appeal at this stage.” Goldman also expects the US economy to be resilient. This partly reflects the fact that the US household sector is less sensitive to rising interest rates due to the impact of long-term mortgages. He also believes European economies are more sensitive to higher interest rates and the dollar could strengthen further if the U.S. economy continues to outperform. Goldman notes that inflation in the eurozone is falling sharply. Although markets expect the ECB to cut rates in 2024, Goldman notes that near-term prices remain resilient. He believes that any adjustment to these expectations regarding recession risks will likely lead to noticeable losses for the euro.
Energy prices will be important for the euro as the currency will be better off if energy prices fall, while strong upward pressure on prices will tend to undermine the euro. Overall, Goldman expects the euro to struggle through 2024 and forecasts EUR/USD to hold at 1.06 over the 6-month horizon.
Euro to dollar exchange rate forecast for 2024 from Scotiabank
Scotiabank FX strategists commented: “The charts show the euro rally is starting to struggle above 1.10, as it did in late November when spot peaked at 1.1017. Intraday price action does look potentially soft. Consolidation is likely to remain a short-term theme, according to Scotiabank: “However, the underlying trend dynamics remain bullish and continue to suggest limited scope for euro weakness and continued pressure on euro growth. Above 1.0960, target 1.11.”
Euro to ruble exchange rate – forecast
Accurately predicting the official euro to ruble exchange rate even for tomorrow is more difficult than US dollar exchange rate. The dollar forecast is based on preliminary data from the exchange, which becomes known several hours before the Central Bank of Russia approves this rate as official the next day. This is not a forecast, but a fact. It’s easier with the euro; at the same time, you can only get an approximate (calculated) exchange rate, and not an accurate one up to the fourth digit. Unfortunately, it is almost impossible to give an accurate forecast for the long term. The euro/ruble exchange rate depends both on the situation in Russia and on the global stock exchange situation (that is, on the euro/dollar exchange rate).
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