Ricardo Evangelista, Head of International Desk at ActivTrades, joined today’s Tip TV Finance Show along with Zak Mir, Technical Analyst at Zak’s Traders Cafe, and Bill Hubard, Chief Economist at Bullion Capital, to discuss the euro – dollar divergence trade, and the outlook for the Fed and ECB.
Divergence between Euro and Dollar
Evangelista mentions that the central bank policies along with the underlying economies is the reason behind the divergence between the euro and the dollar.
Jumping on the Fed rate scenario, he notes that the FOMC Minutes clearly point for a rate hike for the first time in 10 years, but at a slower pace.
Will ECB be less dovish now?
When questioned by Hubard if the ECB will be less dovish after the Fed rate hike bets firmed, Evangelista noted that the circumstances of the major economies in Eurozone aren’t as positive and the ECB has failed to take action quickly, when compared to the US who adopted stimulus quite early. Thus, he doesn’t feel that the ECB will be any less dovish in December.
EUR/USD: Walking towards parity
Evangelista sees EUR/USD parity a slow walk into 2016. He feels that ECB adopting stronger policies in terms of easing and the Fed raising rates will see many investors shift from euro to the dollar.
While this divergence looks to be an easy trade, he also warns of big hits to the short EUR trade if the Fed postpones the rate hike from December to 2016.