By Naomi Rovnick and Alun John
LONDON (Reuters) – The euro may fall to the important thing $1 mark within the subsequent month earlier than rebounding, doubtlessly alongside different Europe belongings given how negatively traders view the area, the chief funding workplace of Europe’s largest asset supervisor Amundi mentioned on Tuesday.
U.S. shares, and the greenback have surged after Donald Trump’s victory within the Presidential election earlier this month, whereas shares exterior the U.S. have struggled, as traders steadiness the implications of upper U.S. development with the implications of attainable tariffs.
The euro has been among the many largest victims of the greenback’s surge, falling again to round $1.05, from above $1.08 initially of November.
“We may even see parity for the euro to the greenback within the subsequent month, however it is vitally mechanical, there may be plenty of demand for {dollars} linked to the surge in U.S. belongings,” mentioned Vincent Mortier, chief funding officer at Amundi, which oversees virtually 2.2 trillion euros of shopper funds.
“However then subsequent 12 months we imagine the euro will strengthen once more,” he mentioned. Amundi forecasts the widespread foreign money at $1.16 by the tip of 2025.
The euro final traded beneath $1 in late 2022.
Mortier mentioned excessive damaging sentiment in the direction of Europe additionally set the area’s shares up for a pointy rally on excellent news, much like that seen in China earlier this 12 months, when hopes of main package deal of stimulus measures despatched traders dashing to snap up unloved shares.
“Catalysts for a European market restoration could be Germany responding to tariff dangers with fiscal stimulus or Russia pulling again from Ukraine”, he mentioned.
Germany is because of maintain elections within the coming months after the implosion of its ruling coalition earlier in November. There’s a risk {that a} new authorities may reform its constitutionally enshrined debt break, which critics say contributed to its present financial decline.
There was nonetheless worth in European authorities bonds, Mortier added, and mentioned Amundi was additionally shopping for 10-year U.S. Treasuries within the expectation yields would fall from right here, as so-called Trump trades might have run too far, however anticipated brief time period volatility in authorities bond markets.
Mortier mentioned U.S. inventory valuations boosted by pleasure over synthetic intelligence have been unusually excessive and volatility unusually low.
“The very last thing you need is to be betting on solely 5 or ten U.S. fairness names,” he mentioned. “We have to be very agile.”
