The ANZ is the latest bank to substantially downgrade its forecasts for the Euro after the recent collapse in the price.
In a note to clients this afternoon, Richard Yetsenga, global head of financial markets research, wrote that he was revising the “FX forecasts to reflect the USD’s strength in Q1 as many of our targets have been achieved.”
Key to what the ANZ calls the US dollars “image upgrade” is:
The differences in policy stance between the US (tightening) and any other economies (easing) remains the starkest summary measure of the forces at play. The surprise rate cuts by the Bank of Thailand and Bank of Korea this week only serve to reinforce the policy divergence between the Fed and most everyone else.
Specifically for the Euro the ANZ says there is “no definitive reason for it to stop” at parity against the US dollar.
Under low and negative interest rates, which are increasingly spreading across the duration of the curve, foreign capital inflows to the euro area fixed income markets have reversed. In the absence of a monetary anchor and continued negative interest rates, the devaluation of the single currency will continue.
That means the ANZ is expecting a move to 95 cents from $1.15.
For the Aussie the economic outlook suggesting more rate cuts is evolving as expected and the ANZ says that:
Risks to commodity prices are skewed to the downside, while interest rate spread compression will also likely weigh on the AUD.
That means the ANZ is looking for the Aussie dollar to fall to 72 cents against the US dollar.
Here is a table of all the ANZ’s new forecasts for the Majors and Asian currencies.