Analysts at Brown Brothers Harriman predict December to become “a month to remember,”
with market players awaiting the Federal Reserve and European
Central Bank to diverge.
Meanwhile, analysts at BNP Paribas predict euro-dollar parity citing the cross-currents of Fed and ECB December expectations.
ECB
President Mario Draghi keeps hinting at further
accommodative measures at the December 3 meeting, Brown Brothers Harriman reminds.
"At the same time, the strength of last week's U.S.
employment report, reinforced by comments from the Fed's leadership,
has convinced many that lift-off is likely a fortnight after the ECB
meeting," BBH continues.
"Following the jobs data, a Reuters poll found 15 of 17 primary dealers expect the Fed to hike rates next month. Analyst and journalists have scrambled to look for the last time the Fed and European policy moved in opposite directions in the same month."
Well, the last time the two central banks split was in 1994, and here is what happened.
Meanwhile, analysts at BNP Paribas predict the shared currency to drop to parity against the greenback. But it will happen only by the third quarter of next year.
"We continue to see EUR/USD navigating the
cross-currents of Fed and ECB December
expectations in the coming weeks but our bias is only for limited
downside given the sensitivity of both central banks to the exchange
rate," says BNP Paribas.
"In our recently revised forecasts, we expect
the USD to appreciate more rapidly than initially projected, reaching a
peak in Q3 2016 vs. Q4 2016 previously. We target $1.06 in EURUSD by
year-end and for EURUSD to reach parity by Q3 2016."
