The euro is now likely to hit parity against the pound sterling by early next year as investors borrow at low cost in the UK to buy higher yielding assets, according to BNP Paribas. The warning as come as the single currency climbs to within a sliver of 90p against the British currency. This morning it was making 89.95p in early trade.
"Sterling is likely to be the weakest currency in town followed by the U.S. dollar," analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas, wrote in a note to clients yesterday.
"The US dollar has been used as a funding and a reserve currency simultaneously, suggesting the US dollar will depreciate less than sterling."
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Good news for cheap Christmas booze to wash away those FF NAMA blues. However, parity would be devastating for employment, particularly in agriculture.