EUR/USD: Parity coming your way by mid-2016 – Nomura

By FXStreet FXStreet (Delhi) – Research Team at Nomura, suggests that if the ECB is willing to lower its deposit rate continuously during 2016 (perhaps towards -50bp), we think there is finally a high probability that parity (1.00) will be tested.

Key Quotes

“In early 2015, we were reluctant to extrapolate a strong EUR depreciation trend too far, and we have never previously embedded parity in our forecast path for EURUSD. However, we now judge that the likelihood of EURUSD hitting parity is high on a 6-9 month horizon.”

“We officially update our EURUSD forecast pointing to a higher possibility of EURUSD breaking parity, while also adjusting other euro crosses.. We will finalize a global revision of our forecast soon, including revised forecasts for the JPY and commodity currencies.”

“The prospect of historical monetary policy divergence between the ECB and the Fed has again come to the fore in recent weeks. Based on our views on the Fed, the ECB and the global capital flow picture, we now believe there is further downside in store for EURUSD both for the remainder of 2015 and in H1 2016.”

“The most likely timing is mid-2016, as it may take that long for the Fed to deliver its ‘second hike’ …read more

Source:: FX Street