US NOV FLASH MANUF PMI 48.8 (FCST: 48.9); OCT 48.5

MNI:Largest Canada New Home Price Dip Since `09 Led By Toronto

CANADIAN OCT FLASH RETAIL SALES +0.7%, 4TH STRAIGHT INCREASE

MNI China Daily Summary: Friday, November 22

MNI: PBOC Net Drains CNY345.9 Bln via OMO Friday

MNI BRIEF: Fed Should Explore Central Clearing At SRF-Hammack

EZ/UK T-Bill Calendar: Germany, France Auction on Monday

EZ/UK Bond Supply Calendar: Gilt Syndi; IT, EU Due Monday

MNI: UNIV OF MICHIGAN CONSUMER SENTIMENT FINAL NOV INDEX 71.8

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

MNI EXCLUSIVE: German Turmoil Dashes EU's Joint-Funding Hopes -Officials

FED: Powell's Time Looks Up, Replacement Could Be Less Willing To Cut Rates?

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

EURUSD: Parity Risks Loom Large in '25

EURUSD
USGlobalCEEMEABulletMarketsForeign Exchange BulletsRegionNorth America
  • EUR/USD's fresh pullback low at 1.0611 today equates to a near 3% sell-off since the election results last week and a >5% downleg off the YTD high at 1.1214. This keeps alive the speculation that EUR/USD could hit parity under an adverse trade war scenario or a particularly hawkish turn from the Fed.
  • While markets see little likelihood of EUR/USD testing that mark in the near-term, but the risk picks up materially thereafter.
  • Just $650mln notional has traded in EUR/USD vanilla put options with a strike at 1.00 or below since November 1st on the DTCC - a relatively meagre % of the $300bln market this month. This providies little concrete evidence of the market's focus on parity just yet - reflected in premiums pricing just a 2.3% chance of payoff for a EUR/USD 1.00 one-touch option expiring on Dec31 this year.
  • We wrote last week that speculation of parity is building, however. The risk becomes much more apparent further down the curve and into the Trump admin's first few months. Compounding this effect, the implied Fed-ECB rate differential has grown considerably for Jun'25, from ~40bps to ~130bps in six weeks.
  • As a result, markets now price a 24% chance of touching parity by end-Jun'25, up from 9.6% ahead of the election/German government breakdown.
210 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • EUR/USD's fresh pullback low at 1.0611 today equates to a near 3% sell-off since the election results last week and a >5% downleg off the YTD high at 1.1214. This keeps alive the speculation that EUR/USD could hit parity under an adverse trade war scenario or a particularly hawkish turn from the Fed.
  • While markets see little likelihood of EUR/USD testing that mark in the near-term, but the risk picks up materially thereafter.
  • Just $650mln notional has traded in EUR/USD vanilla put options with a strike at 1.00 or below since November 1st on the DTCC - a relatively meagre % of the $300bln market this month. This providies little concrete evidence of the market's focus on parity just yet - reflected in premiums pricing just a 2.3% chance of payoff for a EUR/USD 1.00 one-touch option expiring on Dec31 this year.
  • We wrote last week that speculation of parity is building, however. The risk becomes much more apparent further down the curve and into the Trump admin's first few months. Compounding this effect, the implied Fed-ECB rate differential has grown considerably for Jun'25, from ~40bps to ~130bps in six weeks.
  • As a result, markets now price a 24% chance of touching parity by end-Jun'25, up from 9.6% ahead of the election/German government breakdown.