7.7.16

Why the Euro Still Strengthen?


There are many reasons to be bullish on the euro.
The eurozone has a large current account surplus, meaning the total value of goods, services and investment capital flowing out of its economy is larger than that flowing in. Demand for euros from foreign investors will likely help support the currency.

A recession in the eurozone is unlikely,  the economic hit from Brexit likely won’t be severe enough to drive it into a recession. HSBC kept its forecast for 2016 unchanged.

Traders shouldn’t fight the Fed, the most compelling reason not to bet against the euro is the expectation that the Federal Reserve will sit on its hands for the rest of the year. Minutes from the Federal Reserve’s June meeting suggested support has grown for leaving interest rates on hold. The Fed won’t hike rates this year, and they expect only one hike in 2017, without higher rates in the U.S., there’s little incentive for more dollar strength.