Euro’s Rebound This Week Is Temporary
The EUR to USD exchange has seen a rebounding euro. It looked as if the European currency could drop below US$1.03 this week. But it seems to have difficulty breaking through this new level of resistance. Still, the euro will struggle to maintain the current $1.04 level because the dollar is picking up steam. It seems like EUR to USD parity could still happen in 2017.
EUR to USD Is Heading for Parity
The U.S. economy continues to perform better than expected. The latest job numbers, released on December 29, show that the number of Americans collecting unemployment benefits fell to a seasonally adjusted 265,000 last week. The improving numbers throughout the past year sustain the Federal Reserve’s course to raise interest rates, boosting the EUR to USD in favor of the Greenback and parity (or better).
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In 2016, the number of people collecting unemployment benefits dropped by some five percent. (Source: “Weekly Applications for US Jobless Aid Fall to 265,000,” Times Colonist, December 29, 2016.).
The euro managed to edge over the dollar in recent days, but analysts suggest that the euro’s small comeback against the Greenback is a result of the “festive calendar.”
Typically, at this time in the year, there is a shortage of liquidity. Moreover, the EUR to USD remains close to its highest level of the past 14 years. The U.S. currency reflects the Fed’s monetary tightening plans. Meanwhile, other central banks, such as the European Central Bank (ECB) have already noted their intention to maintain a more “accommodating” monetary policy. By that, it means the same low (or lower) interest rates that the ECB has applied for the past few years.
The EUR to USD should start to rebound, pushing the Greenback higher. The exchange could move into a 1.03/1.02 range by the first week of 2017.
