According to currency analysts Bank of America Merrill Lynch, Barclays and Deutsche Bank, the Euro in the next 12 months will reach parity with the dollar, writes The Wall Street Journal. According to the publication, many experts believe that a further strengthening of the European currency will be limited by the intervention of the ECB and the sale of assets in the Eurozone by foreign investors.
Despite the continued rally, many analysts have long made predictions that the Euro will reach parity with the dollar by the end of this year, the WSJ notes. On Tuesday, the Euro rose above $1,16 for the first time since last August. Prior to that, he was increasing for seven consecutive trading sessions.
On Wednesday, the European currency declined 0.2% to $1,148, emphasizes the publication. By 12:00 GMT, the Euro gave $1,144, which is 0.4% below yesterday’s close.
Over the past year, the Euro strengthened against the dollar by 5.7%, reminds WSJ. The U.S. currency over the past six months mainly became cheaper, but economists do not expect a quick increase in interest rates in the United States, the newspaper writes.
A strong Euro makes export products less competitive in the Eurozone, notes the WSJ. Last week a member of the Executive Board of the ECB Benoit Chickens said that the rapid appreciation of the Euro will cause concern. On Tuesday, the European Commission lowered its growth forecast for the Eurozone from 1.7% to 1.6%, identified as one of the reasons for the appreciation of the Euro.
Analysts believe that the ECB will intervene if the Euro appreciates too much with the further lowering of interest rates, writes the WSJ, explaining that the Central Bank wants a weak currency to spur inflation. This year the price growth in the Eurozone is expected to stand at 0.3%, while the aim of the ECB is a rate closer to 2%.
In August last year, analysts at Bank of America expected to reach parity in the Euro/dollar by the end of 2015. Their counterparts at Goldman Sachs then predicted that the Euro will fall to $0.95 for a period of 12 months.
In December, the lowering of the Deposit rate of the ECB led to a sharp strengthening of the Euro. Fellow of the Institute of contemporary development Nikita Maslennikov then said RBC that the Euro will achieve parity with the dollar in the next six months if the fed will raise rates.
In December, the fed for the first time since 2006 raised the base rate by 0.25 b.p. to the level of 0.25–0.5%, and since then has not changed her. During this time the minimum Euro exchange rate of $1,0748 was recorded on 5 January.