The single currency, whose very existence was in question a few years ago due to political instability, today attracts buyers, thanks to capital flows to the “shelter” and the closure of the carry trade.
“Europe is an attractive destination for investing in capital,” notes Viraj Peitel, currency strategist at ING Groep NV.
While investors do not expect higher ECB rates earlier than 2019, it is difficult to ignore the improvement of the macroeconomic situation on the continent.
Since rates remain at record lows, the single currency has not yet broken through the key level of $ 1.20. However, soon the ECB will have no reason to continue the stimulating policy.
Relative safety
The euro index from Bloomberg grew 6 days in a row until Tuesday, as world stocks sank, due to the outflow of investors into the “safe haven” of state debt.
The euro was worth $ 1.1793 in the morning in London, exceeding by more than 1% the indicator of a week ago. Analysts polled by Bloomberg forecast that next year the single currency will grow to $ 1.22 and to $ 1.25 in 2019.
The surplus of the current account supports the attractiveness of the euro as a “safe haven”, says Vasily Serebryakov, currency strategist at Credit Agricole.
Increasing political stability plays a role. Risks from the French presidential elections were left behind, while the crisis in Catalonia did not have a tangible effect on the Eurozone and the euro.
At the same time, other major currencies, such as the dollar and pound, suffer from political uncertainty, as a result of presidential elections in the United States and the referendum on Brexit.