A note from late last week from JPM on the euro.
- 1-Year EUR/USD Forecast 1.06, from 1.08 prior
- But it will drop under 1 if there is "a full-blown debt crisis"
JPM citing:
- sovereign debt burdens across the globe will surge due to COVID-19
But for the euro
- the currency faces the possibility that "the shock to growth and debt levels could, if sufficiently severe and without debt mutualization, undermine the very structure of the currency itself"
- "the lack of political solidarity evident in this crisis also risks fuelling emotive anti-EU and anti-euro populism in the periphery"
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JPM note, looking back, that the jump in EUR earlier in the crisis, when equities began their fall (if you'd been tuning into ForexLive you'd have read the same from us at the time):
- caused by inherently temporary, one-time unwinding of a certain class of EUR-funded financial-market carry trades (the preceding bull market fuelled equity inflows to the euro and outflows from the USD)
- bear market might reverse this and depress EUR/USD
