#EURUSD @ 0.99700 : Return to sub-parity looks appropriate – TDS
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EUR/USD fell from a high of 1.0187 on the day following the US inflation data. Economists at TD Securities believe that the pair should remain under parity for the time being.
“We look to parity to offer support, but the euro is at such a fundamental disadvantage with an imploding balance of payments and decelerating global growth cycle, that we think sub-parity remains the path forward (we have penciled in 0.96 year-end).”
“Note that EUR/USD remains strongly correlated to relative equity prices this year, and we would expect this weaker US CPI print will only intensify that relationship. Indeed, the latter is strongly linked to the global growth cycle. One way to proxy this is through global PMI momentum which has decelerated in recent months while the global stock/bond ratio has been more resilient. This will need to change.”
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