While the euro has found support between 0.96 to 0.97 nominal U.S. dollars per unit, foreign exchange (FX) strategists from Citi believe the euro could tap a low of around $0.86 against the greenback. While the dollar slumped on October 13, the fiat currency is rising again and market strategists from Citi argue that the U.S. dollar “has likely not peaked yet.”
Citi Market Analysts Suggest Euro Could Tap $0.93 — Financial Institution’s FX Strategists Say EU’s Currency May Slip to $0.86 if Economy Continues to Sour
The euro (EUR), the official fiat currency of 19 of the 27 member states of the European Union (EU), has recently fallen in value versus the US dollar (USD). The euro has lost 14.53% against the US dollar this year, and the EUR is down 10.09% in six months. While the 10% drop is painful, it is less severe than the percentage losses experienced by fiat currencies such as the Japanese yen (down 14.99% in six months), the British pound sterling (down 14.46% in six months), and the Australian dollar (down 16.19% in six months).
The euro has seen some relief during the last five days, gaining roughly 0.11% against the USD. The fiat currency has found support between $0.9676 to $0.9721 per unit as FX market charts show the euro faces resistance in the $0.9818 or $0.9844 range. The U.S. Dollar Index (DXY) is hovering above the 113.000 range, after the index saw a brief slide on Thursday, October 13. According to a report from Reuters, market strategists from the financial institution Citi expect the U.S. dollar to climb higher.
Reuters’ contributor Senad Karaahmetovic’s report details that Citi’s strategists insist that the greenback “has likely not peaked yet,” and the analysts envision EUR/USD dropping to 0.93 nominal U.S. dollars. However, Karaahmetovic’s report says the bank’s “FX strategists argue that the major could eventually hit 0.86 if macro headwinds increase.” Europe has been dealing with an energy crisis, and the economic and monetary union has suffered from structural dysfunctions tethered to the Ukraine-Russia war.
Europe has been dealing with torrid inflation and significant high public debt. It has been said that the European Union and many other governments “should default on their debt.” On Thursday, Reuters’ contributor Balazs Koranyi wrote that “four sources close to the discussion said” that the European Central Bank (ECB) estimates that fewer rate hikes are needed to curb Europe’s inflation. The ECB is scheduled to meet on October 27, and markets forecast the central bank to increase the benchmark rate by 75 basis points (bps).
On Friday, the news agency Agence France-Presse (AFP) reported that two senior ECB officials say “uncertainty about Russian energy imports is pushing the eurozone closer towards a contraction in 2023.”