Farming Credit: Multiple factors may collectively push down the euro

On October 25, Fanon Credit said that although the probability of EUR/USD continuing to fall below 1.08 in the next three to six months is still uncertain, the combination of FOREX drivers may maintain a negative impact on EUR/USD, and the currency pair is currently under pressure. In particular, the European Intrerest Rate market has priced in expectations of aggressive rate cuts in the future, despite the fact that the European Central Bank remains dovish and should continue to cut rates amid a fragile recovery in the Eurozone and slowing inflation. Moreover, while the potential return of global risk aversion against the backdrop of rising United States political and global geopolitical risks could further boost the safe-haven appeal of the US dollar, we note that the outcome of the United States election remains difficult to predict. In our view, only a re-election of Trump will exacerbate fears of a global trade war, thereby hitting the recovery of the eurozone and the euro. We cannot yet rule out the possibility of a resurgence of sovereign credit risks in Europe as France and Italy begin their “budget season” in October.