The euro traced out a fresh cycle low at 1.1754 today but analysts at ING expect a decline all the way to parity within two years. The median estimate in the Bloomberg survey is 1.15 by the end of 2016.
ING was ranked as the best forecaster in 2014 by Bloomberg, in large part due to forecasting the euro at 1.20 at year end. They see ECB sovereign QE as the next step in the progression.
ING expects measures by the European Central Bank to boost the euro zone’s flagging economy and avoid deflation will have direr consequences for the currency than most other firms. Few investors will want the euro as policy makers expand the money supply, especially as the Federal Reserve makes dollar assets more attractive by raising interest rates.
“We are one of the most bearish houses on euro-dollar,” Petr Krpata, a foreign-exchange strategist at ING in London, said yesterday by phone. “It looks as if the Fed will start hiking rates sooner rather than later, potentially even late in the second quarter, and this will further fuel the divergence on policy.”
