The Euro underperformed in May and was the third worst-performing G10 currency. Economists at MUFG Bank analyze EUR/USD outlook.

ECB is set to remain hawkish

May was a testing month in which global growth expectations deteriorated and Fed rate hike expectations picked up again. We doubt this backdrop is sustainable and see Eurozone growth resilience helped by lower energy prices and a gradual pick-up in growth in China. 

The ECB is set to remain hawkish while we see a Fed pause in June opening up a renewed decline in US yields and a rebound in EUR/USD