Euro takes another dive Driven by strong growth figures from the US and mixed signals in the Eurozone, the euro has fallen to around 90 cents, after a brief respite around 95.
Markets appear to be taking the opportunity to test the downside again.
Nevertheless, we are sticking to our view that Eurozone fundamentals are good and improving, so in the long-term the euro should pick up perhaps faster than we are forecasting. The upside for the euro comes from a slight but perceptible shift in the balance of risks, from downside risks to growth, to upside risks to inflation. The latest ECB monthly bulletin echoes that concern, suggesting that rates may have to rise further in the near future. We forecast a further 50 basis point hike by the end of the year from the ECB but the risks are on the upside. Dollar boosted by strong Q2 and promise of fiscal loosening Q2 saw GDP growth accelerate in the US, when most commentators were looking for a slowdown.