In this article, we have covered the highlights of global market news about the Euro and USD- MUFG, EUR and GBP, EUR/USD and GBP/USD – DBS Bank, and EUR/USD -ING.
EUR/USD: Parity breach should show greater durability this time, according to MUFG
A break of parity in the EUR/USD rate is imminent. The rise might be more prolonged than last month’s breach beneath parity, according to MUFG Bank economists.
“A breach below parity at this point may be significant. The past month’s parity breach was brief, and it only occurred on one day—the 14th of July—on an intraday basis. Indicators of growing confidence in the next breach being more persistent include a recovery followed by a retracement of the bounce and a break below parity. We absolutely anticipate that.
“The decrease in inflation optimism and some indications that the share market rebound may be slowing down.”
“The Fed and other central banks aim to maintain tighter financial conditions to strengthen downward pressure on inflation, and the coordinated effort via language by the Fed is assisting in accomplishing that.”
EUR and GBP could decline further, but not to YTD lows, predicts HSBC
The European Central Bank (ECB) and the Bank of England (BoE) will probably miss market pricing for rate rises, which will weigh on the EUR and GBP since both the eurozone and the UK are probably heading for a recession. According to HSBC analysts, any currency gain would be difficult to last even in the event of a faster and front-loaded tightening.
Over the medium term, there will probably be downward pressure on the EUR and GBP.
The EUR and GBP may suffer as a result of the ECB and BoE’s inability to meet market pricing for rate increases.
“We are not persuaded that an outsized rate rise by the ECB (or the BoE) would be beneficial for the EUR (or the GBP) beyond the knee-jerk response. In 2023, the possibility of a policy reversal would presumably increase if tightening were increased and front-loaded.
EUR/USD and GBP/USD may find support at parity and 1.18, respectively, according to DBS Bank.
Following a significant loss last week, EUR/USD is now trading below 1.0050 and is attempting to mount a rebound. GBP/USD is still trading in the red despite being within touching distance of 1.1800. The EUR/USD and GBP/USD exchange rates are predicted by DBS Bank economists to stabilise at 1.00 and 1.18, respectively.
The eurozone and the UK will both see higher inflation in the next months.
“In the next months, inflation in the UK and the eurozone will continue to rise, in contrast to the US. To stop inflation expectations from de-anchoring, the European Central Bank and the Bank of England may join the Fed in raising interest rates by 50 basis points in September.
After the significant losses of the previous week, the EUR/USD and GBP/USD may find support around parity and 1.18, respectively.
EUR/USD poised to revisit July’s low of 0.9950 – ING
Following a precipitous plunge last week, EUR/USD is trying to mount a comeback. According to ING experts, the pair is still highly hefty and might go below parity at any moment.
The rebalancing of Asian central banks’ portfolios may be contributing to the sell-off.
“Asian FX is still under a lot of stress, which will lead to intervention to sell dollars and boost local currencies. Then, in order to rebalance foreign exchange portfolios to benchmark weightings, Asian FX reserve managers will have to sell EUR/USD.
“The market anticipates a 54 bps rate increase for the meeting on September 8th. If the ECB wants to support the EUR/USD, may it begin to raise the possibility of more drastic rate increases? This week, keep an eye out for any hawkish remarks in northern Europe.
“The bias for EUR/USD this week seems to be a retest of the 0.9950 low from July.”
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