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ECB reinforced bets on the euro and the dollar parity

The ECB’s decision at the last meeting supported the expectations of weakening the euro to parity with the

The ECB’s decision at the last meeting supported the expectations of weakening the euro to parity with the dollar.

The chances of such a scenario rose to 44% from 31% on December 7th, before the Fed meeting. The euro dipped to $ 1.0506 on December 5th, the lowest level since March 2015. In December 2002, the single currency was worth less than $ 1.On Thursday, Mario Draghi said that the term of the asset repurchase program has been extended, but its size is reduced from EUR 80 billion a month to 60 billion.
The main driver for EUR / USD short-term rates are, therefore, the decision of the ECB will “bear” effect on the couple.

Below we consider the forecasts of analysts:

“Downside risks to EUR / USD strengthened after the ECB meeting and the euro parity with the dollar can be achieved in the first half of 2017″ – says Derek Halpenny of MUFG.

«EUR / USD will continue to decline in the new year, while by the end of the first quarter of 2017, to reach 1.04” – says Stephen Seyvell of BNP Paribas.

“Changes to the ECB’s easing program will ensure the growth of the yield curve EUR in central and peripheral countries”, – said Francesco Gartsarelli of Goldman Sachs.

“Changes in the asset purchase program will have a twofold effect on the rate. 5-year bonds will take into account the ECB’s intention to continue accommodative policy, against the background of weak inflationary outlook, while quotations of long-term German bonds – inflated by historical standards.

We recommend the 5 and 30-year spreads, increasing the angle of the bond yield curve “, – says Anton Heath from Morgan Stanley.