US and UK rate hikes to drive euro further south

The euro has lost considerable ground since last spring as the persistence of very weak growth in the eurozone, coupled with a fall in inflation to very low levels, forced the ECB into further policy easing moves.

It has also become increasingly clear that while interest rates are likely to rise, albeit modestly, in the US and UK over the next couple of years, they are set to remain pegged at virtually zero in the eurozone for a prolonged period.

The euro fell from $1.40 last May to close on $1.20 by the end of 2014. Against sterling, it declined from a high of 84p in early 2014 to 78p at the end of the year. These trends continued in the opening weeks of 2015, with euro weakness gathering momentum on the back of the ECB announcement of a full-blown QE programme.