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A Wall Street street sign outside the New York Stock Exchange in New York City. / Courtesy of Reuters and Yonhap News Agency

Wall Street has pulled back its bullish outlook on the euro, forecasting that the currency could slide to $1.10 per euro.

Bloomberg reported on the 28th (local time) that major Wall Street investment banks—including JPMorgan Chase, Morgan Stanley, and BNY Mellon—expect the euro to drop by more than 3% within the next year to touch $1.10. Bloomberg explained that this would extend the currency's recent slide toward a one-year low.

As of the day of the report, the euro-dollar exchange rate stood at $1.1386 per euro.

Mainstream commercial banks on Wall Street, such as Bank of America (BofA) and Wells Fargo, lowered their previous forecast of $1.20 down to $1.15. The Royal Bank of Canada (RBC) also predicted a decline to $1.10 by the end of next year.

The downward revisions come amid the potential for further interest rate hikes by the US Federal Reserve and a cautious stance from the European Central Bank (ECB).

Fed Chair Kevin Warsh strongly hinted at the possibility of rate hikes during a press conference following the Federal Open Market Committee (FOMC) meeting on the 17th, stressing that curbing inflation remains the top priority.

Meanwhile, ECB President Christine Lagarde has shown a passive stance toward further tightening after raising rates once this month.

Geoff, a senior EMEA market strategist at BNY Mellon, noted, "The ECB's passive approach contrasts with the strong dollar, widening the interest rate differential between the US and Europe," adding, "This makes the euro look less attractive to investors, mounting downward pressure on the currency."

Kit Juckes, chief FX strategist at French bank Société Générale, pointed out, "The euro's rally is effectively over," noting, "Energy crises are always negative for the euro, and the European economy remains weakened by the surge in energy costs following Russia's invasion of Ukraine in 2022."

                                                                                                            Park Jin-sook