EUR/USD set to break parity – Deutsche Bank

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 1, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Research Team at Deutsche Bank, notes that the Eurozone has experienced a historically unprecedented shift in portfolio flows, with net fixed income outflows running at a staggering 500bn EUR over the last twelve months, the largest on record.

    Key Quotes

    “These flows are mostly directed towards US bond markets and have exceeded the Eurozone’s current account surplus. They have pushed the basic balance into deficit over the past year contributing to EUR/USD weakness.”

    “Euro-area portfolio outflows will likely remain in the driving seat for years to come as core Europe’s (mostly Germany’s) vast savings are deployed overseas, while American and Asian investors retreat from European assets. Quantitative Tightening, the reserve draw-down by the major central banks in emerging markets, has only helped to accelerate this process. Bearish pressure on the euro from this structural adjustment is therefore likely to continue irrespective of how much easing the ECB delivers in December.”

    “We re-iterate our forecast for continued EUR/USD weakness over the course of this decade, with a move below parity in 2016 and a terminal forecast of 85cents by 2017. We also re-iterate our expectation that European demand for foreign assets and bonds in particular is likely to be a persistent source of downward pressure on global bond yields in years to come.”
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