Euro Exchange Rate Forecasts 2014: March Update Confirms Losses Ahead vs USD, GBP and CHF

By Gary Howes

The euro exchange rate complex is forecasted to remain under pressure in 2014. However, the EUR remains a stubborn customer warns TD Securities.

The 2014 exchange rate forecasts from TD Securities confirms the central scenario that the euro will decline vs the Swiss Franc, British pound and US dollar.

The EUR has performed broadly better than many in the FX forecasting world have expected. For reference, today's rates are as such:

"Despite record low core inflation, weak credit growth and weak inflation expectations – all of which suggest the risk of additional ECB policy steps cannot be fully discounted at this point, the EUR seems to have benefitted from modestly better than expected GDP data for the end of last year," says Cristian Maggio at TD Securities.

Investors appears to have taken the data, which saw the Eurozone economy grow 0.5% in the Q4 year as a positive even as US GDP growth outstripped that by a margin of more than 2 percentage points.

The immediate-term outlook will be dominated by Thursday's March ECB interest rate decision.

Analysts are not expecting any changes to be announced, however if any major central bank were to provide a surprise to markets, in all likelihood it would be the ECB.

On balance, the outlook is EUR-negative

Despite the stubborn performance put in by the shared currency thus far in 2014 TD Securities maintain their bearish scenario:

"If the risks for inflation look balanced in the US but tilted to the upside, the risks in Europe feel tilted to the downside.

"Unemployment rates are close to the highs and wage inflation, anaemic across most DMs, is even more so in the Eurozone.

"We are not betting on deflation yet. One can only get deflation if wages deflate and that is not yet likely. But, the slow grind higher in prices may be slower than elsewhere and further near-term policy easing cannot be dismissed.

"With the Fed telling us clearly that there will be no policy adjustment and the ECB leaving the door ajar for further accommodation, we find it a little odd that the USD has been somewhat more sensitive to disappointing data than the EUR.

"Still, we believe that the EUR will need to see very positive data in the next few weeks to sustain recent strength or extend beyond the late 2013 range peaks above 1.38."

Euro dollar exchange rate forecasts

1 EUR to convert into 1.33 USD in 1st quarter 2014
1 EUR to convert into 1.27 USD in 2nd quarter 2014
1 EUR to convert into 1.24 USD in 3rd quarter 2014
1 EUR to convert into 1.22 USD in 4th quarter 2014

Euro pound exchange rate forecasts

1 EUR to convert into 0.81 GBP in 1st quarter 2014
1 EUR to convert into 0.80 GBP in 2nd quarter 2014
1 EUR to convert into 0.78 GBP in 3rd quarter 2014
1 EUR to convert into 0.77 GBP in 4th quarter 2014

Euro Swiss Franc forecast

1 EUR to convert into 1.23 CHF in 1st quarter 2014
1 EUR to convert into 1.25 CHF in 2nd quarter 2014
1 EUR to convert into 1.27 CHF in 3rd quarter 2014
1 EUR to convert into 1.30 CHF in 4th quarter 2014