MARKET HEADLINES
Euro to fall below parity with dollar by 2017: Deutsche
Bank
The euro's exchange rate against the dollar will fall to $0.95 by 2017, taking the single currency back below parity for the first time in more than a decade,
according to a report by Deutsche Bank. The call by Germany's biggest bank, the world's second largest currency trader, is
the most aggressive yet from a major investment house, the majority of whom have already turned overwhelmingly bearish on the euro. The report, arguing that rock bottom investment returns and huge trade surpluses
would drive a flood of capital out of Europe, implies a further 25 per cent
depreciation of the euro. The currency has already slumped 10 per cent since May, when it reached a two-and-a-half year high just under $1.40. The consensus view among the major foreign exchange players is that the euro will
continue to slide over the next year but it was last worth less than one dollar in
2002, the end of an early stage crisis of confidence in the euro project.
Barclays has predicted the euro will fall to $1.10 in a year's time and continue to fall thereafter. Goldman Sachs has it at parity with the dollar in 2017.
Sterling steadies, UK manufacturing data helps
Sterling steadied on Tuesday, helped by the dollar's retreat this week against a
range of currencies and on the margins by industrial output data for August that
came in no worse than forecast.
The pound's momentum has evaporated since hitting multi-year highs against the dollar earlier this year and it hit a three-week low against a trade-weighted basket
of currencies on Monday.
That largely reflects the dollar's gains since July but also a rise in political jitters
ahead of a national election due next May and a worsening of economic data that
has cooled any expectations of a rise in interest rates this year.
Rabobank strategist Jane Foley said that sterling was benefitting from a clearing
out of the "long" positions for sterling gains.
While Tuesday's data showed UK industrial output steady on the month in August,
it was up 2.5 per cent in annual terms and manufacturing grew 3.9 per cent, a
touch more than forecast.
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