July 14 (Bloomberg) -- The euro will fall against the dollar because Europe’s banks are weaker than those in the U.S., which may prompt higher deficits and lead the European Central Bank to print money to buy corporate debt, BNP Paribas SA said.
European banks are “worse off than their U.S. counterparts,” analysts led by Hans-Guenter Redeker in London wrote in a note today, citing International Monetary Fund data that showed companies’ so-called M3 deposits, a measure of money supply, have been negative since February. This indicates that “credit has tightened significantly,” they wrote.
“Market expectations of a quick rebound in growth and return of inflation are massively overdone” in Europe, BNP Paribas said. “The euro-dollar is a clear sell on rallies.”
The euro traded at $1.3981 at 3:09 p.m. in London, little changed from yesterday. The euro may fall below $1.3740, BNP Paribas said, without giving a timeframe.
M3 deposits include cash, savings and institutional deposits.