30 Mar 2015
EUR/USD might head towards parity by year-end – BAML
FXStreet (Barcelona) - Expecting the EUR to gradually weaken on policy divergence, Athanasios Vamvakidis, FX Strategist at BofA-Merrill Lynch, forecasts EUR/USD to head towards parity by year-end, although short-term risks of correction do exist.
Key Quotes
“We have been projecting a weak Euro this year, but have also been expecting a correction of the EUR/USD weakening trend in the short term.”
“Beyond the short-term, we would expect divergence of monetary policies to continue weighing on the Euro. The ECB has announced optimistic macro projections, which we see as targets, justifying QE at least until September 2016, even if data improves further.”
“Whether EUR/USD weakens well below current levels will depend to a large extent on whether the market starts expecting QE2 by the ECB next year.”
“We expect EUR/USD to gradually weaken to parity by the end of this year.”
“The path may be more volatile than our baseline projections, as a lot will depend on the Fed’s tone ahead of the first rate hike and the balance between improving Eurozone data and persistently low inflation expectations.”
“Headlines from Greece and the elections in Spain could also add to volatility."
“Risks: Data surprises have been supporting EUR/USD, which could lead to a further upward correction in the short term, as the US data may have been affected by the heavy winter.”
“On the other hand, developments in Greece pose negative risks for the Euro, as we expect prolonged uncertainty and market volatility even if Greece stays in the Eurozone.”
Key Quotes
“We have been projecting a weak Euro this year, but have also been expecting a correction of the EUR/USD weakening trend in the short term.”
“Beyond the short-term, we would expect divergence of monetary policies to continue weighing on the Euro. The ECB has announced optimistic macro projections, which we see as targets, justifying QE at least until September 2016, even if data improves further.”
“Whether EUR/USD weakens well below current levels will depend to a large extent on whether the market starts expecting QE2 by the ECB next year.”
“We expect EUR/USD to gradually weaken to parity by the end of this year.”
“The path may be more volatile than our baseline projections, as a lot will depend on the Fed’s tone ahead of the first rate hike and the balance between improving Eurozone data and persistently low inflation expectations.”
“Headlines from Greece and the elections in Spain could also add to volatility."
“Risks: Data surprises have been supporting EUR/USD, which could lead to a further upward correction in the short term, as the US data may have been affected by the heavy winter.”
“On the other hand, developments in Greece pose negative risks for the Euro, as we expect prolonged uncertainty and market volatility even if Greece stays in the Eurozone.”