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'Perfect storm' to lead to euro-dollar parity by December?

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The prospect of the euro falling to equal the dollar has returned with a vengeance after the European Central Bank signaled on Thursday that it would consider extending its massive bond-buying program well into 2016 and even beyond.

Following the bank's decision to hold interest rates at record lows, ECB President Mario Draghi told a press conference that the "degree of policy accommodation will need to be re-examined in December" as inflation remains stubbornly low amid emerging market weakness.

This was widely interpreted as a sign that the bank's trillion euro ($1.1 trillion) quantitative easing (QE) program could either be expanded or extended beyond its original September 2016 deadline.

Analysts now believe a "perfect storm" could be brewing if the ECB eases further in December and the U.S. Federal Reserve chose that month to hike interest rates.

These conditions would strengthen the dollar further against the euro, just as the single currency was weakened by more ECB stimulus.

 

Source: CNBC


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