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11 Mar 2015
Fed hike, ECB QE and downside risk for oil supporting Euro’s walk towards parity – TDS
FXStreet (Barcelona) - Richard Kelly, Head of Global Strategy at TD Securities, views that downside risks for oil combined with the ECB’s bond purchases and Fed’s move towards rate hike are supporting TD’s call for a Euro dollar parity move by year-end.
Key Quotes
“Markets are providing significant macro opportunities at the moment. For those with a bit of whiplash, yes, both US data disappointment and Eurozone upside surprise are on a scale not seen in at least four years—in fact, these are the highest upside risks to Eurozone growth we have seen for years.”
“Yet we see the Fed taking another hawkish step towards exiting ZIRP next week while the ECB is in day 3 of 410 of bond buying.”
“Already some in the market are angsting over a fear the ECB will run out of bonds or could end the program early—we’re not even close.”
“Our commodity strategists continue to reinforce the downside risks for oil prices, which with US storage capacity falling by around 1.5% per week leaves us on track to run out of storage capacity by end-May, leaving oil prices with only one way to go. Macro vol is going nowhere anytime soon.”
“All three of these dynamics—Fed hiking, ECB digestion of duration, and downside for oil—are supportive of EUR lower. Even two out of three are likely enough to meet our call for EURUSD through parity by year-end, which may have looked heroic at the start of the year when we made it but now seems to leave an open question of whether we trade through parity before all of the snow has melted in the US.”
“For broader trends, we still like EURUSD, NOKSEK, and EURGBP lower and USDCAD as having the best support in this environment.”
Key Quotes
“Markets are providing significant macro opportunities at the moment. For those with a bit of whiplash, yes, both US data disappointment and Eurozone upside surprise are on a scale not seen in at least four years—in fact, these are the highest upside risks to Eurozone growth we have seen for years.”
“Yet we see the Fed taking another hawkish step towards exiting ZIRP next week while the ECB is in day 3 of 410 of bond buying.”
“Already some in the market are angsting over a fear the ECB will run out of bonds or could end the program early—we’re not even close.”
“Our commodity strategists continue to reinforce the downside risks for oil prices, which with US storage capacity falling by around 1.5% per week leaves us on track to run out of storage capacity by end-May, leaving oil prices with only one way to go. Macro vol is going nowhere anytime soon.”
“All three of these dynamics—Fed hiking, ECB digestion of duration, and downside for oil—are supportive of EUR lower. Even two out of three are likely enough to meet our call for EURUSD through parity by year-end, which may have looked heroic at the start of the year when we made it but now seems to leave an open question of whether we trade through parity before all of the snow has melted in the US.”
“For broader trends, we still like EURUSD, NOKSEK, and EURGBP lower and USDCAD as having the best support in this environment.”