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Citigroup has dimmed its expectations for the rally in the US dollar, saying it no longer expects the buck to reach parity with the euro over the next year.
The New York-based bank said that it now expects the euro to fall to $1.04 over the next six to 12 months, from a previous forecast of 98 cents. The common currency traded on Monday $1.076, but had closed as low as $1.0388 in late December. It sat at about $1.10 ahead of the election of Donald Trump in November last year.
Citi’s less bullish view for the dollar comes as the Trump administration finds itself lodged in a heated battle on Capitol Hill over its plans for replacing and repealing the Affordable Care Act. The struggle for the new administration may delay plans for business-friendly proposals, like tax cuts, regulatory reform and a large infrastructure spending programme, the bank said.
In the shorter-term, the euro could get a further boost against the dollar if risk that has been priced-in over the French election abates. Citi said that the currency could jump as high as $1.10 over the next three months if François Fillon scores a victory in the second round, even if Marine Le Pen takes takes the initial vote.