Euro may find parity again

The Euro remains vulnerable to further losses against the US dollar and growing number of analysts believe the EUR/USD currency pair may once again reach parity before too long.

The Euro is down nearly 5.5% since July and the trend remains firmly to the downside with Eurozone economic data remaining unsupportive and reinforcing a view that the European Central Bank (ECB) has completed its hiking cycle with the next move being a cut.

At the same time, the U.S. economy is moving forward and many predict at least one more rate hike from the US Federal Reserve and any rate cuts are now not expected until 2025 at the earliest.

“We are prepared to raise rates further, if appropriate," Fed Chair Jerome Powell told a news conference after the central bank’s Sept. 20 meeting.

 "The fact that we decided to maintain the policy rate at this meeting doesn't mean we have decided that we have or have not at this time reached that stance of monetary policy that we are seeking."

Recent economic data from the Eurozone has shown that higher interest rates has worked in slowing down the economy and it looks as though the European central bank had no choice but to bring to an end their rate hiking cycle.

"With economic activity remaining rather poor in the Eurozone, and the ECB having paused its rate hiking cycle earlier than expected, the EUR/USD outlook remains bearish until such a time that Eurozone macro pointers start to improve again, or US data deteriorates so sharply that it brings the time of the Fed’s inevitable rate cuts significantly forward," says Fawad Razaqzada, an analyst at City Index.

Looking further ahead today, there is not much news that is likely to drive the EUR/USD currency pair and market participants will be eagerly awaiting the release of Friday’s U.S. PCE inflation figures which may further support the recent trend of Dollar firmness if they come ahead of expectations.

The Eurozone should attract some attention with inflation figures from Spain, Germany and France due for release ahead of Friday's Eurozone figures.

Headline Eurozone CPI inflation is forecast at 4.6% y/y, down from 5.2% previously. Core is forecast at 4.9% y/y, down from 5.3%.