The dollar should be strengthened in the coming quarters. The currency pair is determined primarily by the strong divergence in monetary policy pursued by both central banks, because while the Fed is already implementing an exit strategy, the ECB has announced a major package of monetary stimulus measures . Additionally, the currency pair will also be determined by the macro pulse. USA It is in a position of clear advantage over Europe.

During the last quarter, the euro has lost momentum at its junction with the dollar largely by the difference between the rates of performance of both central banks. The Fed even though it continues to support the economy with an ultra-expansionary monetary policy, is implementing an exit strategy and has even established a more or less concrete hike, 2015 and removal of stimuli, the autumn term. In contrast, the ECB continues to show unwavering support to the economy, recently presented an ambitious package of measures which will increase the demand for credit, reduce financing costs and provide high liquidity.

It also reiterates that monetary policy will remain loose for a considerable period of time and it seems clear that the first rate hikes will not occur in 2015. In addition, USA It presents a stronger European financial table, even after he had to face a first quarter that was affected by bad weather. Instead, Europe shows significant signs of recovery but is at a distinct disadvantage compared to the US. Finally, the tension stemming from the conflict Russia / Ukraine has reduced considerably, which has slowed the appreciation of the euro.

Looking ahead to the coming months the dollar appreciation trend should be consolidated. In addition to the monetary policies of both central banks will follow a very different course, the currency pair also depend on the macroeconomic pulse . United States presents a very healthy macro picture, while Europe is gaining strength gradually. Briefly, we think the dollar will tend to appreciate even somewhat faster than we estimated in the previous Strategy Report.

Therefore, we modify our reference range in 2014 to 1.30 / 1.35 from 1.30 / 1.40, while in 2015 the currency pair should return to the reference range 1.25 / 1.35.

Links of interest:

Strategy Outlook report 3rd quarter 2014

Bags forecast 2014-2015: Ibex 35, Euro Stoxx 50, S & P 500 and Nikkei 225

Euribor 2014 and 2015: What will your evolution? (boards)