Euro Parity is More Likely Now
2024-10-21
Summary:
The euro steadied after the ECB's second rate cut but saw its third weekly loss vs. the dollar and its worst drop vs. the pound this year.
The euro steadied on Monday after the ECB delivered a second rate cut in a row as expected last week. It suffered a third straight week of losses against the greenback and its worst weekly drop against the pound this year.
The risk of the euro sliding to parity with the dollar is mounting in financial markets after the interest-rate cut and stark reminder that a Donald Trump presidency could spark a global trade war.
Pictet and Deutsche Bank no longer consider a scenario where one euro buys a single dollar to be far-fetched, while JP Morgan Private Bank see the risk that the common currency could fall toward that level this year.
A gauge of risk reversals over the next month is now the most negative on the euro-dollar in three months, and the near-term puts are concentrated on a fall to the $1.08-$1.07 area.
Money markets imply a 20% chance the ECB will deliver a half-point cut at the final meeting of the year and are almost fully priced for quarter-point reductions at every meeting through April.
Governor Lagarde did not provide hints about future moves but sources close to the matter told Reuters a fourth cut in December is likely unless economic or inflation data turns around in the coming weeks.
The pair has rebounded off the oversold territory, but still traded below the 200 SMA. If the level is not cleared, we could see a fresh drop towards 1.0800.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
Asian funds feel unsettled for the rest of 2024
A Bank of America survey found global investor sentiment at its most optimistic since June 2022, driven by rate cuts and China's stimulus plan.
2024-10-22
US stocks muted as investors await key earnings
US stocks retreated from record highs and six straight weekly gains on Monday as Treasury yields rose, with investors wary of high valuations.
2024-10-22
Why European Stocks Face a Lower Bar in Today’s Market?
Analysts have lowered their earnings forecasts for European companies at the fastest rate in seven months, expecting less impact on stock prices.
2024-10-18
