EUR/USD: Is moving to parity probable? – Rabobank
The current resilience of the US economy is in stark contrast to that of Germany. The extent of the vulnerability of the EUR next year under either a Trump or a Harris presidency will depend on how dovish the ECB becomes, Rabobank’s FX analyst Jane Foley notes.
Parity is within the realm of possibilities
“The ECB is mandated to target inflation. However, there are signs that growth concerns have spread within the Governing Council. Yesterday, the IMF forecast no growth for Germany this year, following a -0.3% contraction in 2023. Germany’s government expects economic activity to contract by -0.2% this year.”
“This suggests that Germany is on course for being the weakest economy in the G7 for the second consecutive year. The IMF point to the weakness in manufacturing in both Germany and Italy. German exporters face a weak China, the ongoing impact of the energy transition and an ageing demographic which has shrunk the pool of available labour.”
“The latter, however, is inflationary. In view of economic headwinds, we would expect that many German exporters would welcome further softening in monetary conditions and a lower value for EUR/USD. It would appear that parity is within the realm of possibilities. We will revise our forecasts in early November.”
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FXStreet Insights Team
FXStreet
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