Euro Dollar parity run being fueled by the ECB – MP

FXStreet (Barcelona) - Dean Popplewell, Director of Currency Analysis at MarketPulse, views that the EUR’s continued slide has been facilitated by Draghi’s bond-buying program, with the declining yields preparing the single currency for the biggest quarterly decline.

Key Quotes

“Markets volatility is being driven by the ECB’s QE program. It appears that the market is in desperate need to front run Draghi’s bond-buying program as the fear of collateral scarcity unfolds quicker than expected.”

“The speed at which longer term Euro yields are being driven towards zero is helping to pick up the pace of the EUR’s decline.”

“Presently, the EUR is poised for its biggest quarterly decline. The shared currency has managed to weaken about -11.6% outright this year, slumping to another 12-year low this morning.”

“The fact that the EUR is falling for a legitimate fundamental reason, and has the full support of the ECB, there is no reason why further heavy losses cannot continue. The large divergence in the monetary stance of the Fed and the ECB will not be changing anytime soon. Nor will the fact that negative interest rates are forcing a wave of cash out of the eurozone, depressing the single currency even further.”

“The size of the ECB’s QE program (about half the size of the U.S and U.K) was never going to “inflate” deflation alone. The ECB needs a much weaker EUR and they are getting it as Eurozone domestic investors look abroad for higher returns and higher yields.”