FX Update: EURUSD parity unlikely to hold the line for long. FX Update: EURUSD parity unlikely to hold the line for long. FX Update: EURUSD parity unlikely to hold the line for long.

FX Update: EURUSD parity unlikely to hold the line for long.

Forex 5 minutes to read
John Hardy

Head of FX Strategy

Summary:  EURUSD parity has been revisited this morning after last week’s breakdown below range support in the pair at 1.0100. This time, unlike the episode back in July, the level is unlikely to hold the line for long if Fed Chair Powell stays on message with the intent to continue tightening Fed policy at this Friday’s Jackson Hole, Wyoming speech. Elsewhere, the CHF continues to get respect on SNB policy credibility, the still very positive Swiss current account, and lower realized Swiss inflation.

FX Trading focus: EURUSD parity back in view even as market raises ECB expectations. CHF gets respect.

Rising EU yields and even ECB rate expectations aren’t worth much as long as gas/power prices in Europe continue to spiral out of control, at multiples of what US industry is paying for its gas and power supplies, continuing to drive a worsening current account imbalance made additionally unattractive by extremely negative real rates. As we kick of another week, we now have another shutdown of Russian gas deliveries through the Nord Stream 1 pipeline, said to be for a few days of maintenance. This has spiked forward natural gas and power prices to even more absurd levels than the already dire levels of late. An observer on Twitter, one @LionHirth claimed this morning that “German industry has stopped buying power and gas forward…either prices will fall, firms say, or they’ll stop producing.”.  At least some rain upstream has helped raise most of the trouble spots on the Rhine considerably, which will aid deliver of coal and diesel to power plants, but Europe remains under extreme pressure and EURUSD is under renewed pressure as well, with parity unlikely to hold like it did in July as discussed in the chart below.

The USD has been strongly bid since last Thursday as last week saw the market continuing to slowly push out its view of the timing of peak Fed rates as well as when Powell and company will eventually shift to an easing stance. The degree to which Fed Chair Powell succeeds in continuing to drive a repricing of the Fed forward curve to the upside will be an important factor for the greenback this week, as will the direction of longer US treasury yields after Friday saw a more determined jump higher in yields at the long end of the curve, with the 10-year benchmark touching 3.00% overnight.

We continue to keep USDCNH on the radar on the risk of a firmer upside break than what we have seen thus far. Overnight, the PBOC eased the 1-year rate a mere 5 basis points versus the 10 basis points expected, but eased the 5-year rate by 15 basis points, a move seen as throwing the beleaguered Chinese property market a bone. Yes, USDCNH has traded to new highs well above 6.84, but given the scale of USD strength elsewhere, this so far remains more about China moving to prevent the yuan from tracking aggravated USD strength rather than showing signs of desiring a broader weakening.

EURUSD has slipped back to parity and a bit worse this morning. It’s a symbolic level that may have a hard time holding this time around as long as the EU continues to wind its way to an incoming recession with no relief in sight on the power/natural gas emergency. Flash August PMI’s are up tomorrow morning for France, Germany and the Eurozone after the July survey showed German slipping into slight contraction in both manufacturing and services, France was still seeing an expanding services sector but slightest contraction in manufacturing, and the Eurozone-wide survey was near the 50 market for both numbers. A fresh sell-off could target 0.9500 next.

Source: Saxo Group

It’s worth pointing out the Swiss franc’s solid performance of late, even as Switzerland is suffering as well from the pressure from rising gas/power prices, although only 15% of the country’s total energy consumption is natural gas. Recall that the SNB hiked rates 50 basis points at the June meeting to take the rate to -0.25% and has allowed the EURCHF level to continue lower to ease inflationary pressures (highest headline print has been 3.4% in July, with the core at a mere 2.0%.). Unlike the Eurozone, where the overall current account turned negative over the winter due to the oil and gas import price shock, Switzerland still runs a chunky surplus, one that increased in late 2021 and early 2022 (perhaps on gold exports?) The combination keeps the country and its currency as a fortress of stability in a far-more-punitive-negative-real-rates-elsewhere world. Where will the SNB allow EURCHF to go? Why not 0.9000 or a bit further – after all, USDCHF has reversed solidly back higher recently after trading to multi-month lows, taking some pressure off the global CHF valuation picture, which might only become a bigger focus from the SNB at 0.9000 in USDCHF (versus nearly 0.9600 today). Certainly, the EURCHF downtrend sparked in motion by the mid-June SNB rate hike has been perhaps the most persistent and steady trends of the last two months.

Last week, the Norges Bank bought some credibility with its more hawkish guidance and 50-basis-point move last Thursday, but the current account angle, as noted with EURCHF, may be the important factor here. Somewhat unfairly on that same angle, EURSEK continues to rip higher, but SEK is traditional far more risk sensitive: note that NOKSEK is nearing the range highs above 1.10, which has capped the pair since 2015.

Table: FX Board of G10 and CNH trend evolution and strength.
The FX Board has yet to show isolated weakness in CNH despite the attention on USDCNH. USD strength continues to build, as does GBP and especially SEK weakness, with NZD downside also prominent in momentum terms.

Source: Bloomberg and Saxo Group

Table: FX Board Trend Scoreboard for individual pairs.
Note that EURGBP flipped to positive on the trend on Friday’s close. Also, AUD is flipping positive in some pairs of late as well – note AUDNZD (need a bit more there as the pair still rangebound), with AUDCNH intriguing, although AUDCAD is headed in the opposite direction.

Source: Bloomberg and Saxo Group

Upcoming Economic Calendar Highlights (all times GMT)

  • 1230 – US Jul. Chicago Fed National Activity Index
  • 2300 – Australia Aug. Flash Manufacturing/Services PMI
  • 0030 – Japan Aug. Flash Manufacturing/Services PMI

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.