Question of the week | Eurodollar exchange
We are long-term positive and short-term neutral. The long-run purchasing power parity rate of 1.35 acts as a center of gravity, especially with the eurozone running a current account surplus. In the shorter term, the exchange rate tends to move in line with various contradictory factors. On the one hand, higher US rates should be dollar supportive. On the other, the euro could receive a boost from receding Brexit uncertainties and a potential strong rebound in growth in the eurozone, given the significant role that manufacturing is playing in the current slowdown.
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The opinion expressed above is dated 20 December 2019, and liable to change.
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