EUR/USD could still move back to parity in 2023 – Rabobank

FXStreet Insights Team FXStreet

The sell-off in the US Dollar in recent weeks has lifted EUR/USD completely clear of parity. Looking ahead to the New Year, however, there are plenty of factors that could still unnerve EUR bulls, economists at Rabobank report.

Out of the woods?

“The ECB has a specific challenge given the different debt profiles within member nations and the possibility of spread widening vs. Bunds, particularly in the BTP market, once QT starts. This could trigger risk aversion and weigh on the EUR.”

“Insofar as the current account surplus of the Eurozone has been eroded by expensive energy imports, the EUR is likely to be more sensitive to bad news than in previous years.”

“While EUR bulls may be cheered in the short term by less bad recession fears for Germany, less high energy prices and a hawkish ECB, the single currency is not out of the woods. These risks could still push EUR/USD back to parity in 2023.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD sits at two-month lows near 0.6950 after Australian CPI data

AUD/USD is sitting at two-month lows near 0.6950 in the Asian session on Wednesday, as below-expectations August Australian underlying CPI data pours cold water on expectations for further RBA interest rate hikes. Chinese PMI data also fail to inspire the Australian Dollar, despite a pause in the US Dollar advance.

USD/JPY stays weak below 157.00 amid Japanese intervention risks

USD/JPY keeps losses below 157.00 in the Asian session on Wednesday, as hawkish BoJ expectations, along with intervention risks, underpin the Japanese Yen, countering dismal domestic factory output and retail sales data. Meanwhile, a broad US Dollar retreat also collaborates to the pair's downside.

Gold flat lines below $4,200 as traders await US PCE data for Fed rate cues

Gold extends its consolidative price move heading into the European session, trading below the $4,200 mark amid mixed fundamental cues. Falling US bond yields drag the US Dollar away from the two-month high, touched on Tuesday, and act as a tailwind for the commodity. However, hawkish US Federal Reserve expectations cap the upside as traders await important US macro data before placing fresh directional bets on the non-yielding bullion.

Aave Price consolidates below $161 as profit-taking emerges after 10% surge

Aave slips below $161 on Wednesday after surging more than 10% the previous day, with on-chain data suggesting increased profit-taking. Meanwhile, Aave founder Stani Kulechov is considering an AAVE token-burn mechanism under Aavenomics 3.0, adding a potential catalyst for AAVE.

US core PCE inflation set to rise in August, pressuring the Federal Reserve

The United States Bureau of Economic Analysis will publish the Personal Consumption Expenditures Price Index data for August on Wednesday at 12:30 GMT. Market participants closely watch the PCE Price Index because it is the Federal Reserve’s preferred measure of inflation and could influence its policy outlook.

Silver is more volatile than Gold ahead of PCE and NFP. This chart shows the positioning gap

The market’s attention is focused on American data this week, but there’s something only those with a trained eye may be looking at: Gold and Silver positioning gap. Financial markets are moving on fears, mostly related to persistently high energy prices driven by the Middle East war. Sure, the US Dollar (USD) is strong, but at what cost?