Giles Coghlan LLB, Lth, MA
Financial Source
Euro headed to parity according to Bloomberg
I came across a piece this AM on the Market's Live Blog making a case for parity on the EURUSD pair. The pair currently sits at 1.0835 and so it would need a move of ~8% to move down there.
Reasons for EUR/USD parity
The EUR/USD pair has been at parity before with the most recent times in 2014 and 2015 and there is plenty of reason to think that could continue again:
1. The eurozone economy is weaker than in 2014 and 2015. The slow drag on the eurozone economy is set to remain too with the potential for supply chain disruption from China and Brexit negotiations carrying on in its usual combative and confused state.
2. Bond yields are paying less than in 2014 and 2015.
3. ECB's main interest rates are lower than in 2014 and 2015.
4. The big economies in the eurozone are struggling: German growth stagnated in Q4, French industrial production is falling alongside German industrial production (-2.8% vs -0.3% m/m), and Italy's Central Bank Governor Visco sees risks to the country's economy.
Whereas the US 10 year yield is at 1.58% (around 200bps more than Germany's rate of -40bps) and Fed Chair Powell says the economy is in a 'very good place'. It is perhaps not surprising to see why short EUR positions continue to build for the Euro on the COT report last Friday.
EUR/USD sell on rallies
With EURUSD having broken through key support any return back to 1.1000, 1.10500 and 1.1200 look suitable for sellers to re-engage short positions in the medium term.
Our products and commentary provides general advice that do not take into account your personal objectives, financial situation or needs. The content of this website must not be construed as personal advice.
Recommended Content
Editors’ Picks
AUD/USD hovers around 0.6500 amid light trading, ahead of US GDP
AUD/USD is trading close to 0.6500 in Asian trading on Thursday, lacking a clear directional impetus amid an Anzac Day holiday in Australia. Meanwhile, traders stay cautious due ti risk-aversion and ahead of the key US Q1 GDP release.
USD/JPY finds its highest bids since 1990, near 155.50
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, testing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming Japanese intervention risks. Focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold price lacks firm intraday direction, holds steady above $2,300 ahead of US data
Gold price remains confined in a narrow band for the second straight day on Thursday. Reduced Fed rate cut bets and a positive risk tone cap the upside for the commodity. Traders now await key US macro data before positioning for the near-term trajectory.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price. Coupled with broader market gloom, INJ token’s doomed days may not be over yet.
Meta Platforms Earnings: META sinks 10% on lower Q2 revenue guidance Premium
This must be "opposites" week. While Doppelganger Tesla rode horrible misses on Tuesday to a double-digit rally, Meta Platforms produced impressive beats above Wall Street consensus after the close on Wednesday, only to watch the share price collapse by nearly 10%.