Having just posted on Afoe suggesting I expect a quieter day, I have just noticed this:

“The euro fell against the dollar after the manufacturing report. The European single currency traded at $1.2285 at 10:15 a.m. in Frankfurt, down from $1.2304 late yesterday in New York, according to electronic foreign-exchange dealing system EBS.”

Still this fits in with the general picture I described, every piece of bad news can drive down euro/USD. In this case it was the manufacturing survey. I suppose, taking this a step at a time, the question is how long it needs before we break below $1.20, at this rate, and if we get a bad enough day tomorrow, we can be getting near by the end of the week. Maybe this depends on the US jobs data on Friday. I should write a post entitled eurozone/USA: the great race to the bottom (remember most US commentators are expecting a further dollar decline associated with the current account deficit).

I agree with an earlier commentator (and MS’s Stephen Yen: parity by year’s end would be OK from the European end (although not in Washington). The thing is, by years end, right now what we need is someone to reach for the handbreak.

Update: It reach $1.2257 at 10:30 a.m. in London. In part this is a result of a story in Germany’s Stern magazine.

Update 2: 13:00 Washington post has this:

“The euro dropped to $1.2255 in European trading, also propelled downward by an unsourced report in the German weekly Stern that a possible failure of the monetary union was discussed at a meeting last week attended by Germany’s finance minister and central bank chief.”

Update 3 “The euro fell as low $1.2224 in European trading before climbing back to $1.2242, still down from $1.2312 in New York late Tuesday”.