Baku, Azerbaijan, Jan.26
By Leman Zeynalova – Trend:
The euro to slip back against the dollar in 2018, the UK-based consulting company Capital Economics told Trend.
“We expect the euro to slip back against the dollar in 2018, even though we have revised our end-year forecast up slightly from $1.10/€ to $1.15/€. This revision reflects the fact that the exchange rate has risen a long way in recent months, to around $1.20/€; and the economic outlook in the euro-zone has become even brighter than we had expected,” said the company.
The company analysts believe that for now, financial markets seem determined to view any news as positive for the euro, and as negative for the dollar. “But we don’t think this will last.”
“However, we suspect that the euro will begin to weaken again before long. This is largely because we expect the dollar to stage a recovery,” the analysts believe.
The bulk of the appreciation of the euro this year reflects dollar weakness rather than euro strength: sterling has appreciated more against the dollar than the euro (5.1 percent versus 3 percent), according to Capital Economics.
“While factors other than monetary policy expectations have been driving the dollar for some time, we think that will change as expectations for the US Federal Reserve Board of Governors (Fed) to raise rates begin to increase,” said the company.
However, the consulting company’s expectations for dollar in 2019 are pessimistic.
“We expect 2019 to be a different story. Our view is that the yield of 10-year Treasuries will drop back to 2.5%, as the Fed’s tightening cycle ends earlier than expected amid signs of slowdown in the US economy. Against this backdrop, we forecast that the dollar will fall back against the euro (to $1.25/€),” said the company.
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