Home NewsForex Market News The euro fell to a 20-year low against the dollar, analysts believe there is room for further decline |

The euro fell to a 20-year low against the dollar, analysts believe there is room for further decline |

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The euro fell to a 20-year low against the dollar, analysts believe there is room for further decline |


The euro fell to a 20-year low of 0.9903 in early trade on Tuesday (23rd), with analysts predicting that the euro will continue to slide.

“Our forecasts, our trading and our strategists’ stances are all about further depreciation of the euro,” said Luis Costa, head of CEEMEA strategy at Citibank. “This is the most vulnerable time for the euro.”

When comparing the euro to the dollar, there are a number of factors that go hand in hand with the ongoing conflict in Ukraine and rising inflation in both regions.

European wholesale gas prices rose sharply on Monday after Russia announced unscheduled maintenance on Nord Stream 1, the main pipeline to Germany, while a heatwave in Europe put additional pressure on energy supplies.

To get the full picture, one has to look beyond Europe and the U.S., says Costa, “don’t forget that the slowdown in China has created additional complexity for Europe, which obviously has a bigger impact on Europe relative to the impact in the U.S. much more.”

China’s economy grew just 0.4% in the second quarter, below expectations. Since the beginning of 2020, China, the world’s second-largest economy, has been grappling with the consequences of a severe coronavirus outbreak.

According to Kostad, markets had been considering a hard line from the European Central Bank (ECB) and the Bank of England (BOE) until May, but have “broken” in recent months, “in terms of the ECB’s rate hike, it is absolutely clear that it There will be very little room for rate hikes.”

Roelof-Jan Van den Akker, strategist at global financial institution ING, made a similar forecast last week, pointing to a widening spread between the dollar and the euro and further weakness in the single currency.

“The dollar fell below the 103.60 support level. That’s a very key horizontal support, so there is further downside potential. The long-term target for the euro in the coming months is between $0.80 and $0.75,” he said.

The forecasts reflect concerns that inflation will continue to rise and that a recession in Europe is now inevitable.

However, the strength of the dollar may not last long, said Societe Generale macro strategist Kit Juckes.

“All in all, for now, the dollar may have reached its limit,” he noted on Tuesday. “That’s not to say that Europe’s energy problems, China’s economic weakness and policy easing, and U.S. jobs and inflation data won’t go further. Push it, but when someone suggests that buying dollars is ‘the easiest FX trade’, a chill goes down my back and warns me to be careful.”

Jukes believes that Europe should be able to recover from these “dilemmas”, “I don’t see how it can bounce back much beyond short covering; but if risk markets don’t intervene, the euro can lay the groundwork here.”

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