At the same time, Nordea expects the dollar to weaken further over the medium term and forecasts EUR/USD rising to 1.26 by the end of next year.
The bank notes that in previous economic cycles the dollar typically declined for around five years, suggesting there is still room for additional downside in the coming years—especially given that the U.S. currency remains overvalued by historical standards.
Nordea also points to clear parallels with the dot-com bust of 2000–2002, when the U.S. dollar weakened noticeably alongside a sharp downturn in the technology sector.
While the bank does not anticipate a full-scale stock-market crash or a collapse in the AI-related sector, it stresses that such a scenario cannot be entirely ruled out.
Even without aggressive sell-offs, Nordea expects a shift in investment allocations, with reduced exposure to U.S. assets and higher currency-hedging ratios among investors.
From a fundamental perspective, the bank also anticipates further Federal Reserve rate cuts, while increased defense spending in the euro area should support the regional economy and limit the scope for additional rate cuts by the ECB.
