EUR/USD is close to a breach of parity. Economists at MUFG Bank believe that this move could be more sustained than last month’s break under parity.

A break below parity at this juncture could well be meaningful

“A break below parity at this juncture could well be meaningful. The break in parity last month was fleeting and was only below parity on an intra-day basis on one day – 14th July. To then bounce but retrace the bounce and break back below parity would be an indication of increased confidence of the next breach being more sustained. That’s certainly what we expect.”

“The decline in optimism over inflation and some signs that the equity market recovery could be petering out.”

“The Fed and other central banks want tighter financial conditions to be sustained in order to reinforce downward pressure on inflation and the concerted effort through rhetoric by the Fed is helping in achieving that.”