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.