The EUR/USD parity party won’t be ignited, says Jeremy Stretch, Head of G10 FX Strategy for CIBC, when he joined today’s Tip TV Finance show to discuss the EUR/USD pair and the role of policy divergence, as well as why Carney should stop re-enacting the Fed’s outlook.
EUR/USD: Policy divergence, but parity?
Stretch says that the markets are already discounting the big policy divergence between the Federal Reserve and the ECB. Technically, EUR/USD sees a lot of hurdles, and when combining this with the current account surplus in the Eurozone, the parity call isn’t a certainty, says Stretch.
The downside in the Euro is subject to two key elements – the positioning, and the scale of Fed tightening in 2016.
Stretch further adds that the markets remain too ambitious for the pace of Fed tightening in 2016.
Bill Hubard, Chief Economist at Bullion Capital, added that with US elections coming up next year, the Fed remains concerned over the timing of its hikes so that it can avoid looking politically biased.
Carney will layout his policy platform internally, but the question is how much will be accepted by the rest of the BoE panel. For further insights on UK interest rates, watch the video.