The euro's rally against the dollar is likely to peak in early November, when the Federal Reserve will hold its next meeting, and the single currency could fall to parity with the greenback by next year, said John Taylor, chairman and chief investment officer at FX Concepts.
The euro will most likely peak between $1.43-$1.45, said Taylor, who noted that euro zone economic data has started to worsen and investors have fully priced in the prospect of US quantitative easing.
"I just don't see all this bullishness on the euro. I don't think talk about exit strategies from the ECB is right," said Taylor, who oversees the world's largest currency hedge fund, with assets under management of about $8.5 billion.
Taylor, in an interview with Reuters late Thursday, said he believes a sustained downtrend in the euro is under way as he outlined his view that the single currency could fall to parity with the dollar by next year.
Midmorning in New York, the euro was up 0.1 percent versus the dollar at $1.3937 . It hit a high of $1.4161 Oct. 15 but has struggled to stay above $1.40 since.
Taylor believes the euro will most likely hit a top during the first week of November, which is when the Federal Reserve, at its Nov. 2-3 policy meeting, is expected to announce a new round of quantitative easing. After that the euro will start to decline, but will have support between $1.3580-$1.3600. If these levels give way, he said the downtrend would be in place.