The US Dollar has fallen about 4% since it peaked in October and has retraced about half of its gains since July. We think this correction should be faded and we're affirming our call for Euro/Dollar to fall back to parity by the spring of next year, meaning the USD will rise a further 8% versus the Euro.

This is a controversial and out of consensus call, but we think the market is still underpricing weakness in Europe and strength in the US, and a continued widening in growth and rate differentials should weigh on the pair.

An 8% move in a few months is a pretty big move and moves that large don't happen that often. If we look at options pricing, the market is pricing in an even lower risk of such a move compared to historical frequencies. And it's worth remembering that large moves do happen. EUR/USD fell 10% in a four month window two different times last year. So while this call may be bold and buck consensus, we think the fundamental story still holds.