After coming back to life after its poor first quarter performance against the greenback, the euro now appears to be heading towards another downfall. This decline in the single currency can be attributed to positive U.S. economic data as well as comments by the Federal Reserve’s Chairwoman Janet Yellen that interest rates are still likely to be raised in 2015.
Based on this, analysts now see the possibility of parity between the euro and the USD back on the cards. This comes from concerns that the central bank just might wait until 2016 before they increase rates.
Meanwhile, the euro’s unexpected turnaround over the last few weeks has caused doubt among analysts regarding the materialization of the euro-dollar parity. Interestingly though, it seems that the euro’s bounce back over the last few weeks has now reached the end.
In a research note, currency strategist at Oanda, Craig Erlam commented that the “longer-term trend in the dollar will now resume and we remain on course for [euro-dollar] to achieve parity in the fourth quarter”. His views were echoed by other analysts.
The EUR (EURUSD, -0.1096%) recently traded at $1.09, down from $1.1150 a week ago.
According to Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co, there is a 72% chance of the euro-dollar parity being realized by end of the year. His numbers are based on the recent level of volatility exhibited by the currency pair as well as the comeback of the euro from mid-March to mid-May which can be defined as a correction.
In terms of parity between the euro and the USD, the Royal Bank of Scotland Plc (RBS, +0.56%) has maintained its prediction of the euro closing the year at 98 cents.
MT4 Chart: EUR/USD
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