Market and product

Those who were going to bet against a stable dollar wondered what to buy instead. The answer may seem to some at once obvious and bold: the euro.

Although the euro-dollar pair is the most actively traded in the world, recent prospects for Europe have not been very bright. The eurozone has to deal with a sagging economy, the consequences of global trade disputes and the risks associated with the uncertainty surrounding Brexit. A large volume of bonds with negative rates is also concentrated in this region.

All these factors hold back the euro, which this year lags behind most major currencies. But some of these problems recede, and the currency again becomes an attractive asset for some buyers: in October, it showed the highest growth against the dollar since the beginning of 2018. Some investors hope that the gradual acceleration of growth and progress in negotiations between the US and China will increase the appetite for risky assets and spur the strengthening of the euro.

“A period of relative stability in trade negotiations” should support the currency, says Francesca Fornasari, portfolio manager of Insight Investment with assets of $ 844 billion. There are also “expectations of a shift in emphasis on fiscal policy as a means of sustaining growth in Europe.”

So far this year, rates against the dollar have not been a good idea even against the backdrop of expectations of a weakening US currency. He stubbornly recovered from periods of subsidence and in early October reached more than two-year highs. Until last month, the euro had been declining for eight of nine months.

Strategists at JPMorgan Chase & Co. led by Paul Megieshi they say they are “exploring the possibilities” for opening long positions in the euro against the dollar, but remain cautious, including because of economic hardships. This team is encouraged by data showing that the eurozone balance sheet surplus in annual terms - an indicator that includes a current account, capital transactions and net foreign direct investment - turned out to be a record.

The technical figures on the charts also support the idea of ​​the euro recovery, say Tom Fitzpatrick and other strategists at Citigroup Inc.

Citi recommended November 1 long positions in the euro against the dollar at $ 1.1146 with a stop loss of $ 1.1025. The initial target for this strategy was $ 1.14 and higher, but by the end of the year it could reach or exceed $ 1.18, Fitzpatrick said. On Wednesday, it closed at $ 1,1066.

Short translation of the article: Euro Emerges as a Brave Bet Against Dollar Heading Toward 2020. -Bloomberg-