Danske Bank expects the euro to fall to $1.16 in the coming year, from $1.2125 on Friday afternoon, due to expectations of monetary policy tightening by the Federal Reserve (Fed). The market “is beginning to incorporate a scenario” in which the Fed could raise interest rates and gradually reduce bond purchases, with the prospect of a broad fiscal stimulus under the Biden administration strengthening hopes for a strong economic recovery in the United States, explains Lars Merklin, of Danske Bank. On the other hand, the European Central Bank (ECB) “should not change any parameter” of its policy, he adds. “If this divergence in expectations about the path of future rates persists, we expect the dollar to appreciate,” he