EUR/USD currently trades above the 1.06 level, however trading pundits believe that the pair won’t easily leave the gravity force of parity.

Multiple factors that drive EUR/USD

It’s going to be a tough balancing act for forex markets with higher EUR rates on one hand, which will boost the carry-attractiveness of the currency and higher real rates that would hit the EU growth, which is already bogged down by the shock of the last year’s negative terms of trade. This would dent the potential investments of the EU assets and make EUR look dull compared to peers.

Experts also believe that the bearish case for EUR/USD is under the pump, but there is still a chance to make decent trades if followed the mantra of ‘sell on rallies’ instead of ‘buying on dips’.

EUR/USD is projected to have close to 0.90 as fair (based on terms of trade, real rates, and unit labour costs), and seems difficult to escape the gravity force of parity unless there is exponential growth globally in 2023.