Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Q3 Fed Hike To Take EUR/USD Below Parity; We Target 0.95

Published 04/23/2015, 02:43 AM
Updated 07/09/2023, 06:31 AM

As US macroeconomic data have been a weaker than expected since the beginning of 2015, this has delayed expectations on Fed tightening according to market pricing, notes SEB Group.

"Usually we would expect this would be fairly well reflected in the EUR/USD exchange rate. However, because of extensive bond purchases by the ECB and probably several other reasons including offshore dollar funding, a lower oil price and capital flows of reserve managers, the dollar remains in demand. Consequently, EUR/USD has instead been consolidating in recent weeks rather than correcting higher," SEB argues.

Market Expectations And FOMC Forecast

"As EUR/USD currently trades around 1.07 despite waning expectations on Fed tightening, we have lowered our EUR/USD forecast for the end of this year to 0.95 from parity. Subsequently we expect the combination of more positive news on the US economy later this year and the Fed delivering two hikes in 2015 (in September and December to 0.6%) and even more to 1.50% in the following year to benefit the dollar," SEB projects.

"As a result, EUR/USD may easily move below parity as the ECB continues to expand its balance sheet. Also, it is hard to imagine Greece's problems will recede unless it defaults on its debt, which would create additional euro-related uncertainty," SEB adds.

Original post

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.