Home Forex Market News Barclays Cuts Euro Forecast to Most Bearish on Economy Slowdown

Barclays Cuts Euro Forecast to Most Bearish on Economy Slowdown

Barclays Plc lowered its one-year euro forecast to the most bearish of Wall Street banks as the currency union’s economy deteriorates and as increasingly aggressive monetary policy signals further depreciation.

Europe’s common currency will weaken to $1.27 in a month, to $1.22 in three months and to $1.10 in a year, strategists led by Jose Wynne said in a report today. That compares with forecasts of $1.30 by the end of 2014 and $1.27 in a year, according to the median estimate of economists and strategists surveyed by Bloomberg. Morgan Stanley projects the euro weakening to $1.20 by the end of the third quarter of 2015, according to data compiled by Bloomberg.

“We now see a more protracted and significant slide in the EUR and are revising our forecasts substantially lower over a 12-month horizon,” Barclays said. “We expect this to be a multi-year trend, returning EUR/USD to lows not reached in more than a decade.”

The euro dropped 0.3 percent to $1.2901 at 9:18 a.m. in New York, after declining to $1.2860 yesterday, the weakest since July 2013.

The European Central Bank unexpectedly cut interest rates to record lows Sept. 4 and ECB President Mario Draghi said it will buy asset-backed securities as it tries to spur a slumping economy.

Central Bank

The central bank will buy “a broad portfolio of simple and transparent securities” and euro-denominated covered bonds, Draghi said, with details to be announced in October. The ECB lowered its refinancing, marginal lending facility and deposit rates by 10 basis points, or 0.10 percent, each, taking the deposit rate to negative 0.2 percent.

Goldman Sachs Group Inc. forecast the euro will weaken to parity with the dollar by the end of 2017 as the region confronts escalating deflation and the risk that some of its biggest member states are falling back to recession.

Robin Brooks, Goldman’s New York-based chief currency strategist, cut his one-year forecast Aug. 29 to $1.20 from $1.30, saying the ECB will need to ease monetary policy further to counter falling inflation expectations.

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