18th of June - BNP Paribas: Euro to Fall Below Dollar Parity

Discussion in 'Forex' started by ASusilovic, Jul 27, 2010.

  1. The euro has been enjoying a rebound over the last two weeks, rising to $1.24 from below $1.20 on June 7. But analysts at BNP Paribas don’t expect it to last long. In fact, BNP, which has been correctly bearish on the euro all year, is getting even more bearish.

    Back in early May, when the euro was trading north of $1.26, BNP came out and predicted the euro would hit parity – one dollar per euro – in the first quarter of 2011. Today, BNP revised that forecast lower, saying the common currency will fall below parity with the greenback:

    While our previous projections suggested EUR/USD reaching parity in Q1 2011 and rebounding only sluggishly thereafter, we now think that a prolonged period of EUR undervaluation will be required to provide EMU with the growth impulse it needs to help overcome the crisis. We expect EUR/USD to drift to 0.97 in Q3 2011, ending next year at parity. However, we expect the euro to decline in orderly market conditions.

    For other markets, that last sentence could be key. During the worst of the euro’s recent declines financial markets were locked into “risk off” mode, with tight correlations to the ebb and flow of the common currency. The euro’s rebound has allowed that fear level to ease somewhat. Should the analysts at BNP continue to be right on their directional call for the euro, the big question is how other markets will respond.



    Hum, Hans Guenter Redeker and team : I am still waiting for this orderly `decline`....