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EU Economics

Euro set to CRUMBLE amid political election chaos as banks UNDERESTIMATE populist uprising

THE euro could soon crack under the pressure of political mayhem in the eurozone as banks are failing to accept populist parties will win upcoming elections, according to leading forecasts.

The currency is set to crash below parity with the US dollar in the coming months amid crucial elections in Germany and France, a top economist has predicted.Sentiment in the eurozone has plunged in recent weeks amid lower than expected growth and Greece’s debt crisis once again threatening to split the bloc.

The growing popularity of France’s anti-Brussels candidate Marine Le Pen has also alarmed markets, amid her pledge to call a Frexit referendum should she win the election.

Despite these fears, the euro has managed to hold on to its ground against the US dollar.

euro crumbleGETTY

The pound could be about to crash against the dollar


The euro has been edging down against the dollar


But this resilience is not set to last, according to Jonathan Loynes from Capital Economics.He said: “We are not inclined to abandon our negative position on the single currency.

“We suspect that the markets are still underestimating the potential implications of political developments in Europe.

“And while previous bouts of eurozone jitters have not been as negative for the euro as might have been anticipated, such concerns will this time exacerbate the fundamental forces for divergent monetary policy.

“For these reasons, we’re sticking with our forecast for the euro to drop below parity against the dollar by the end of this year.”

The pressure on the eurozone currency comes amid a sharp divergence in monetary policy with America.

The European Central Bank has extended its huge money-printing programme until the end of 2017 and keep ultra low interest rates in place, keeping the euro weak.On the other hand, the US Federal Reserve is set to continue raising interest rates – with some investors expecting as many as three hikes this year.

Mr Loynes added: “With the ECB set to remain on hold for the foreseeable future, our expectations for Eurozone/US interest rates differentials at the end of this year and next point to plenty of downside scope for the euro.”

http://www.express.co.uk/finance/city/769241/Euro-to-dollar-forecast-Currency-parity-election-chaos

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