The strengthening of quantitative easing by the ECB and the parallel increase in interest rates by the Fed could cause a real earthquake in the currency market.
According to Deutsche Bank experts, the single currency could not only reach parity by the end of the year, but even fall below that threshold.
Two dates that investors will have to keep in mind: December 3 and 16. In the event that the European Central Bank at the board meeting to be held next Thursday confirms what it announced last month, further easing monetary policy, the first would be accomplished. At that point we will have to wait for December 16, when it will instead be the turn of the Federal Reserve to explain in detail how it intends to raise interest rates.
The two meetings will in fact have a very strong impact on the currency market, and the balance of power between the two currencies could reverse in a short time. For 2016, Ulrich Stephan, head of investment strategy for private and corporate clients at Deutsche Bank, predicts one euro close to the all-time low of 0,85 dollars while by the end of next year the single currency should settle at around 0,90 dollars.
According to Stephan Schneider, chief economist of Deutsche Bank, the ECB will decide in early December a cut equal to 10 basis points (to -0,30%) of the bank deposit rate and another 10 basis points will be cut in 2016 (to - 0,40%) while the Fed should decide three monetary tightenings by the end of 2016, each by 25 basis points.
Deutsche bank's prediction comes on the day thesingle currency falls to its lowest since April against the dollar, reaching 1,0579.
The concerns expressed by Frankfurt on the financial vulnerability of the Eurozone to exogenous risks affected today's performance.
