Analysts at Bank of America noted that while some market watchers continue to speculate that the exchange rate could reach parity, such an event is considered rare and short-lived historically.
They pointed to a chart showing that, with the exception of the dot-com bubble burst, the probability of a currency pair trading at or below parity is virtually nil based on quarterly data.
Analysts explained that the future path of the EUR/USD pair will depend on a precise interaction between factors.
These challenges include the tension between unsustainable debt levels and perceived U.S. economic superiority, as well as Europe’s efforts to strengthen its position in the face of geopolitical and energy challenges.
Moreover, the possibility of a trade war following the US elections could put additional downward pressure on the euro.
Despite these risks, Bank of America stresses that a decline to parity will likely only occur in extreme risk scenarios, and is not expected to last for long.
Bank of America’s assessment comes against a complex backdrop of global economic uncertainty that continues to weigh on currency valuations. The EUR/USD pair, in particular, serves as a barometer of the relative economic health and policies between the eurozone and the United States.
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