April was the euro’s strongest month in five years, despite the general slump in the currency’s value since the start of the year.
The euro rose by 1.7% on a trade-weighted basis in April (the measure compares the euro to a basket of currencies that it’s most often traded with) is still down by 6.6% since the start of 2015. According to Bloomberg, the euro rose by 4.6% against the dollar in April, the most since 2010.
Here’s how the trade-weighted index looks:
The euro-dollar exchange rate has been pretty volatile, with a bigger than expected programme of QE from the European Central Bank (ECB), and changing perceptions of when the US Federal Reserve might hike interest rate.
Rabobank’s analysts think that the euro should still weaken against the dollar over the next year, but not to parity as some expected a couple of months ago (the euro is currently at $US1.126):
We maintain our view that EUR/USD will be trading at 1.04 in 12m as the key fundamental driving factors remain intact: Chair Yellen is still likely to tighten monetary policy over the 12 month horizon and at the same time President Draghi will keep his foot firmly on the QE pedal. To seriously consider a possibility that a sustainable recovery in EUR/USD might unfold in the coming months, prospects for a rate hike in the US this year would have to diminish further.