LONDON (Reuters) - Swedish bank SEB said on Thursday it had cut its forecast for the euro’s exchange rate against the dollar due to the political worries in Italy and now expected it to trade around $1.10 by the end of the third quarter of 2018.
The bank’s previous forecast was $1.18, according to Carl Hammer, SEB’s head of global macro and FX research.
“It’s a combination of things. We see more political worries in Italy though we don’t expect a crisis. We also think the market is underpricing the extent to which the U.S. Federal Reserve will continue to hike rates,” Hammer said.
The bank has a year-end forecast for euro/dollar of between $1.12 and $1.14.
Several banks have cut their euro/dollar forecasts in recent weeks after the dollar’s month=long rally triggered a reassessment of the path for the world’s most traded currencies.
SEB said that once central banks outside of the United States begin to tighten monetary policy, the dollar is likely to return to a weaker spell in 2019.
Reporting by Sujata Rao; Editing by Tommy Wilkes