The dollar’s meteoric rise may be just about over

19-Mar (MarketWatch) — The U.S. dollar’s eight-month long roller-coaster ride is about to head downhill, analysts at HSBC said Thursday.

Strategists at the British bank have raised their euro forecasts, becoming the first major bank to predict a resurgent euro by the end of next year. They now see the euro rising to $1.10 by the end of next year — and $1.20 by the end of 2017.

That is a contrast with a dour forecast from Goldman Sachs issued just last week. Goldman updated their forecast, saying that they saw the euro hitting parity by September, and falling to 80 cents by year-end 2017.

HSBC’s David Bloom, one of the report’s authors, said that while the rally may have some more room to run, the fundamentals suggest that the market has already priced in easing abroad — and is underestimating the potential impact of slowing domestic growth.

“People are saying we don’t have to worry about data because the central banks are anchored — but currencies aren’t just about interest rate differentials, they’re not just about policy differentials,” Bloom said. “The U.S. economy is surprising to the downside aggressively. Don’t ignore it.”

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