4 Expert Forecasts for the Euro in 2020 All Predict the Same Thing
Forecasts for the EUR USD vary from bank to bank and from month to month. This article looks at the general trend in the Euro forecast and how it might impact your home currency.
In 2020, most banks forecast the Euro will gradually strengthen against the US Dollar. However, with the coronavirus pandemic hitting global economies, banks have adopted a "wait and see" attitude to updating forecasts, especially in the near-term.
Both uncertainties from the coronavirus pandemic and Britain leaving the Eurozone (Brexit) will continue to impact the Euro negatively. Slowing European economic growth in the Eurozone will also impact the Euro as will a potentially wider global recession.
How will coronavirus affect exchange rates?
Uncertainty from the coronavirus pandemic increases volatility in currency markets, including the EUR and GBP. Generally, safe-haven currencies like the USD, CHF and JPY will move higher. However, commodity currencies such as the AUD, NZD, CAD and ZAR exchange rates tend to fall. Right now, the USD is relatively weaker than the Euro. Amongst other reasons, the US has been more negatively impacted by the pandemic than other countries, particularly in the 'second wave' of infections.
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Euro USD forecast in 2019
Most bank forecasts show the Euro has been weaker than expected in 2019. Banks frequently had to adjust Euro currency pairs (EUR against other exchange rates) to reflect a falling EUR trend.
Will the Euro get stronger in 2020?
Maybe, if the coronavirus pandemic is controlled effectively going forward.
Let's examine the 5 most likely reasons the Euro will remain weak at current forecast levels:
- Coronavirus pandemic worsens in Eurozone countries and public health systems are unable to deal with the number of people with serious health issues from the virus
- The US economy picks up, US political risks ease, and the Federal Reserve (central bank) increases interest rates, supporting the USD
- Slowing European Union economies led by the German economy. Weaker global growth equates to a falling Euro
- Britain's exit from the EU (Brexit), ongoing uncertainty leads to a weaker Euro rate relative to other currencies (apart from the British Pound)
- China’s economic growth slows, reducing China trade and lowering demand for European imports
How does a weaker Euro affect me?
A weaker Euro isn't great for citizens of the 19 countries in the Eurozone, especially if they want to move or travel overseas or who are already living abroad (which isn't realistic right now with coronavirus lockdowns). Fortunately, you'll be able to transfer money overseas at better rates in the second half of 2020 if bank forecasts are accurate.
If you’re planning to travel abroad a stronger Euro will certainly help you, particularly if you choose a destination with a weaker currency. Travelling right now isn't advisable with the current coronavirus pandemic placing many countries into lockdown.
Expats and Pensioners
If you're an expat or pensioner supporting your lifestyle abroad using a Euro bank account, you might have greater buying power later in the year. This means you can purchase more Pounds Sterling while you’re in the UK, or Aussie dollars if you’re in Australia, for example.
What are the key influences on the Euro exchange rate?
1. Eurozone Economy
Growth in the 19 Eurozone countries was surprisingly strong in 2018/2019, led by Germany and France. This supported the Euro and the Euro against most crosses. However, uncertainty over the coronavirus pandemic in 2020 in terms of the severity and timing means Eurozone countries will continue to slow with a global recession already underway. This will pressure the Euro down against most crosses.
2. EU Politics
Many are still unsure whether integrating the economies of 19 countries into one bundle (the Eurozone) including a common currency (Euro) will work. If one country has political issues, it can create uncertainty for the whole Eurozone. Greater uncertainty from politics means investors will sell the Euro, because there is a greater chance of it getting weaker.
3. Other Currencies
The US dollar (USD) has a significant influence on the Euro. Generally, when the USD gets stronger, the Euro is relatively weaker and vice versa. With the USD plunging recently, the Euro will likely be supported for the rest of the year.
EUR to USD
EUR bank forecast currency pairs
EUR to GBP forecast
Most of the major banks agree the EURGBP cross rate could fall further in 2020. With all of the political issues around the UK exiting the Eurozone, there is still a lot of uncertainty and it looks like banks are taking a cautious approach to forecasting the EUR GBP.
EUR to AUD forecast
Banks are expecting the Australian Dollar to remain relatively weak against the Euro in 2020. However, with the Eurozone and Australian economies slowing down, both currencies could get weaker. This means the EUR exchange rate might not move relatively too much against the AUD next year.
EUR to JPY forecast
Most bank analysts agreed the EUR JPY would move higher in the first half of 2020. However, the Euro is expected to underperform the Yen in the second half of the year.
General advice: The information on this site is of a general nature only. It does not take your specific needs or circumstances into consideration. You should look at your own personal situation and requirements before making any financial decisions.