Euro slide and US dollar rise likely to continue through 2017

Deutsche Bank said on Tuesday it expects the euro to fall to parity with the dollar as early as the end of this year, and it forecast the single currency would drop to just 85 cents per euro for 2017.

Germany’s biggest bank, the world’s second-largest currency trader, had led the way last year in forecasting a devaluation of the euro, saying it expected a huge outflow of investment from Europe in the next two years.

But Deutsche analyst George Saravelos said the age of “Euroglut” has progressed faster than he expected. In a Euroglut, Europe’s savings and the money brought in by Germany’s large trade surplus pile up and get exchanged for higher-yielding currencies.

“European outflows have been even bigger than our initial expectations over the last six months,” he wrote. “We now foresee a move down (for the euro) to $1.00 by the end of the year and a new cycle low of 85 cents by 2017.”

Deutsche’s previous forecast was for the euro to reach parity by the end of next year and 95 cents in 2017.

The EU is China’s largest trading partner China will likely weaken its currency because of the massive slide in the value of the Euro.

Fortune has some historical perspective

A broad-based weakness – the euro’s trade-weighted exchange rate since 1999. Source:ECB

The dollar’s long-term rally may have a long way to go yet. Source:Credit Suisse

SOURCE – Reuters, Fortune, Wikipedia

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