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"A tempting dream": what are the conditions for parity of EUR/USD?
Material posted: Publication date: 24-06-2016
Risks related to Brexit may lead to a slowdown in the global economy.

Parity in dollar and Euro is likely to remain so tempting, but not a dream come true for many speculators in the currency market, said Vice-President of IFC Financial Center Stanislaw Werner. He stated to a REGNUM correspondent on 24 June.

"At least not this year. In the longer term it's real. All due to the fact that the European Union will undergo a new test of strength. If Grexit has been avoided Brexit will remain unfulfilled risk only in case if the authorities will not disagree with people. A strike at the foundations of democracy and do not recognize the outcome of the plebiscite. Prime Minister Cameron has resigned, and his replacement, if it solved, then will sign his own political death sentence. That is actually Brexit can be considered valid. Now might be a Spexit and Frexit — like "separatist" views are strong in Spain and in France, the success of the referendum may add confidence to their spokesmen. But it's not now and then," said Werner.

Now, according to him, the focus will be the fed's policy, which is gradually modificeres from the four rate hikes this year to two, and now, after a Brexit might not see a single one! "This is a blow to the reputation of the fed, disappointing those who bet on the dollar after QE and transition to policy normalization. Such a metamorphosis can happen at the July meeting, July 26-27. This will contribute to the sales of the us dollar against all currencies that will not allow quotations of EUR/USD on the horizon before year-end to reach down from the corridor 1,05−1,16," — said the analyst.

Expert-analyst of MFX Broker Anton Krasko, in turn, told REGNUM that the parity is theoretically possible: in the end, the Euro is only 9-11 cents above parity. The conditions for it can also be created, he said: "for Example, if a British exit from the EU will cause next year the recession in the Eurozone, the ECB in this regard will go for additional easing of monetary policy, and the fed, despite everything, will continue to raise rates."

But trying to predict such things is very difficult, the expert said, because the situation around the UK contributes a very large uncertainty, so it is rather an attempt to get a finger to the sky.

Contrary to the opinion of most experts and the results of the latest opinion polls, the British people voted for Brexit. The final results of counting of votes show that the country's withdrawal from the EU voted 51,9% of Britons. The markets immediately followed by the corresponding reaction: protective assets up, risk down.

Still of the night, upon receipt of the preliminary results of voting in the foreign exchange market experienced a sharp increase of the US dollar almost all other world currencies. Thus, the currency pair EUR/USD fell from midnight to 6 am with up to 1,1420 to 1.0910, updating the lows since early March. However, quickly after the success of British eurosceptics, she began to recover, and by noon were traded near the level of 1,1120.

Senior analyst at Alpari Vadim Iosub admits that all the negativity from the referendum, the European currency has already played nightfall, and a further decline of the Euro/dollar towards parity in the near future should not wait. Moreover, in his opinion, the risks associated with Brexit may lead to a slowdown in the global economy. "This, in turn, may force US to take an even slower pace in the future interest rates rise, what's to stop a strong strengthening of the dollar against other currencies, including the Euro," the analyst added.

Daria Antonova



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