Euro at 11-year lows – what next?

The euro dropped sharply ahead of Thursday’s European Central Bank (ECB) policy meeting, leading some analysts to anticipate a rapid decline to parity against the U.S. dollar.

“The euro is sliding simply because it has not yet factored in the impact of the quantitative easing that starts next week,” Greg Gibbs, head of Asia Pacific markets strategy at RBS said in a note on Thursday.

“The monetary settings are simply not fully priced in yet,” he said, noting “the move towards parity may indeed be very fast.”

The euro ran into heavy selling from early European trading on Wednesday, dropping from around 1.1170 to an 11-year low of 1.1061 in early Asian trading on Thursday.

German bond yields also fell. As the German-U.S. yield differential continues to widen, Barclays head of FX Strategy, Asia Pacific Mitul Kotecha told CNBC, the euro will fall further: “We’re still looking for parity by year-end.”

So far this year, the 10-year benchmark German bund has dropped 23.5 percent to 0.381 percent, while the yield on U.S. Treasury’s has risen 4.0 percent to 2.119 percent.


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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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