LONDON, Sept 17 (Askume) – BNP Paribas Markets 360 believes the euro could rise against the dollar if the global economy falters , marking a break from past trading dynamics.
Sam Linton-Brown, the bank’s global head of macro strategy, gave several reasons for what he described as one of the team’s controversial ideas.
This includes the US dollar being used as a high-yield currency, which has not been the case historically, meaning that the US dollar is more likely to fall as US interest rates fall. The US dollar is more likely to raise interest rates than many other central banks.Pressure from the Fed is another factor pushing it above neutral .
In addition, Linton-Brown said the interest rate spread between the euro and peripheral euro zone government bonds has become less sensitive to the risk-free period, which bodes well for the euro.
Why is this important?
EUR/USD is the most actively traded currency pair in the $7.5 trillion-a-day global currency market, and the driving factors behind its fluctuations have attracted the attention of global investors.
Key Quotes
“If the US makes a hard landing, that would make us more bullish on EUR/USD,” said Lyndon Brown.
situation
BNP Paribas Markets 360’s base case is a soft landing for the economy.
It predicts that the EUR/USD will rise to $1.15 by the end of 2025, representing an increase of just over 3.5% from current levels of around $1.11.
A recent Askume poll predicted the euro would trade around $1.12 in a year.
what will happen next
The Fed is expected to cut interest rates for the first time in four years on Wednesday, perhaps even by half a percentage point. Speculation of a deep rate cut has hurt the dollar, and any sign that the U.S. economy is slowing more quickly than expected — particularly in the labor market — could fuel recession fears.
Figurative
