EUR/USD: consolidation expected before parity run resumes – BTMU

FXStreet (Barcelona) - According to Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, EUR/USD consolidation phase will fade in the coming months opening up a move to parity by the end of summer.

Key Quotes

“Why we remain bearish on the euro is in part our view that the market is underestimating the potential ‘portfolio re-balancing’ impact of QE in the euro-zone. The fact that QE is coupled with a negative deposit rate and less net issuance of sovereign debt means the impact on yields is far greater and hence the potential for capital flight abroad is also far greater”

“The press conference from President Draghi has given us no reason to believe the EUR/USD rate will turn notably higher from here. Indeed, the key message was “full steam ahead” in regard to policy implementation and falling yields in the euro-zone may have quite a bit to go yet which is likely to encourage further capital outflows going forward.”

“Dollar demand is currently muted given the disappointing flow of US data of late but once that turns – we assume over the coming months – that will prompt renewed downside for EUR/USD. Parity is likely toward the end of the summer as yields in the euro-zone and the US are driven wider still by both the ECB and the Federal Reserve.”