Market In-Review – EUR/USD Race To Parity

■ EUR/USD dropped 3.2% during the week, as ECB started quantitative easing program

■ U.S. stock indices bleed on hawkish Fed outlook, leading the S&P 500 to 0.9% weekly decrease

■ Eurozone stock indices gained from ECB QE seeing the DAX add 3% during week

■ Oil dropped another 9.6% during week, to USD 44.8 per bbl

Currency markets continued playing the key driver for last week’s market agenda. The Euro’s weakening seemed rather inevitable as the European Central Bank started purchasing sovereign bonds through its quantitative easing program. After managing to stay afloat on Monday, the EUR resumed losing ground on Tuesday, as it fell to a 12 year record low vs. the U.S. Dollar. EUR/USD’s free fall drew speculation of when the currency pair will reach a price of 1, which gained the nickname ‘parity’.

The sentiment persisted through Wednesday and early Thursday, seeing EUR/USD fall to as low as 1.0495.  The beginning of Thursday’s session, however recorded somewhat of a recovery for the currency pair, adding some 0.8% during the day. Some justification for the USD's weakness was provided closer to the end of the session, with February's U.S. advance retail sales decreasing by 0.6% MoM. Friday, on the other hand, saw the race towards EUR/USD at 1 continue, as the currency pair recorded a 1.3% decrease, concluding the week at 1.0496. All and all, the week saw the USD gain 3.2% vs. the EUR. The USD also strengthened vs. the JPY, seeing USD/JPY gain some 0.5% during the week, to 121.40. The GBP has also been somewhat in the middle during the week, strengthening by 1.3% vs. the EUR and weakening by 2% vs. the USD.

There's no stimulus like monetary stimulus

No longer benefiting from the status of most monetary stimulated economy in the neighborhood, U.S. stocks started the weekly session in the red, with the S&P500 (SPY) losing 1.7% on Tuesday, as the Dollar began its rapid strengthening. The day also saw the S&P cross below the 2,058.90 level, at which it ended 2014, concluding the day at 2044.16. The swinging of momentum towards the end of the week was also quite evident here as the index gained 1.3% on Thursday and lost 0.6% on Friday, concluding a 0.9% weekly loss. Similarly, the Dow recorded a 0.6% weekly decrease and the NASDAQ (QQQ) lost 1.1%. Eurozone equities, on the other hand, have been gaining from growing investor interest. The DAX surged no less than 3% during the week and the CAC 40 increased by 0.9%.

Oil prices have also restarted their habit of dropping last week. After about a month of swinging around USD 50 per bbl, they have dropped 9.6% during the week, ending at USD 44.9. The current price, however, is still higher than the level of USD 46 per bbl, set in the end of January.