EUR/USD bounced around Friday amid hawkish signals from the Federal Reserve and the European Cenral Bank (ECB), but ended the week below parity. Economists at Danske Bank expect the world’s most popular currency pair to extend its slide. 

ECB officials warn of “sacrifice” needed

“ECB seems to follow in the footsteps of the Fed. On Friday, Reuters reported that ECB were to discuss a 75 bps rate hike at the December meeting, while a Bloomberg sources story during the weekend said that QT may be discussed towards the end of the year. Also Schnabel, Holzmann, Kazaks and Knot were all very hawkish.”

“Markets are focusing on discussing the message of 'coordinated tightening' from Jackson Hole as ECB and Fed appear to have re-committed to creating price stability: yields are shooting higher and risk assets are quite a bit lower since last week. This stands in stark contrast to the rally we have seen since June.” 

“We continue to see EUR/USD as declining further, targeting some 0.95 in 12m as dollar strength will likely pick up pace in this environment.”