Banks: Euro To Fall To Dollar Parity?
Often, markets do the exact opposite to what mainstream media claims is likely to happen.
JP Morgan and Citibank have stated they expect the euro to fall to parity with the dollar, something that happened briefly at the end of 2022, but that has otherwise not been the case since the launch of the euro over 20 years ago.
However, the banks, mainstream media, and financial elites are often not the best places to get your financial news.
The report in the Financial Times blames inflation and weak Eurozone growth for the analysts' prediction.
JPMorgan has downgraded its forecast for the euro to $1 by the end of the year. Citibank said it is targeting a move to parity "within six months" given its "ongoing view of European recession well ahead of the US".
The euro has already fallen 6% against the dollar since July, as the US economy shows surprising strength. Ongoing problems in Ukraine and the Middle East, along with the USD's safe-haven narrative and "higher for longer" interest rates, mean many financial institutions have publicly stated they are bearish on the euro.
All too often, though, these financial giants and the mainstream media end up forecasting the opposite of what actually happens, while savvy traders who are able to take a step back from the markets end up making money.
There might be a number of reasons for this. There's the fact that most reporters have no particular training in economics or the markets. The reality that by the time news is actually reported, markets have already reacted. The fact that markets typically do the opposite to what the majority expect. The expertise of "smart" institutional money over "dumb" retail money. Even occasional collusion and deliberately bad information being published.
This reality can be seen playing out on the charts over and over again, as macro analyst Jason Pizzino explores in a recent video.
Doom and gloom tends to coincide with market lows, not forecast new ones. When the news is at its most bearish, the move down is already over, and there's no one left to sell. That's been the case many times over the last few months, with apocalyptic-sounding events such as recession fears, the threat of a banking crisis, the debt ceiling crisis and shutdown concerns have marked lows in the S&P500, failing to do the damage that so many analysts claim is coming and instead providing an excellent buying opportunity.
As Pizzino notes, on the technical level, the USD has reached a local top, with momentum waning after 11 consecutive weeks of gains. While it's early days, that would potentially suggest quite the opposite scenario for the euro in the closing months of this year.
Whether the financial elites are deliberately misleading the market is a moot question. The reality, though, is that the information they publicly state is not always as reliable as they would have you believe.
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