Euro Drop to $1.20 `Matter of Time' as Growth Lags U.S., BNP Paribas Says

Gains by the euro won’t last and the currency will probably breach $1.20, the first time in more than four years, as budget cuts in Europe depress growth while the U.S. recovery accelerates, according to BNP Paribas SA.

“While the U.S. shows increasing signs of recovery, allowing growth to outweigh concerns about fiscal imbalances, in Europe the situation is the opposite,” BNP strategists led by Hans Redeker in London wrote in a research note today. “We remain convinced that the break of the $1.20 level is just a matter of time.”

Europe’s single currency gained 1 percent to $1.2295 as of 11:05 a.m. in London, snapping three days of losses. The 16- nation euro hasn’t traded below $1.20 since March 2006, according to data compiled by Bloomberg News.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

May 28 (Bloomberg) -- Sebastien Galy, a currency strategist at BNP Paribas SA, talks with Bloomberg's Susan Li about his forecast for the euro. China denied as "groundless" a report that it’s reviewing foreign-exchange holdings of euro assets, and the nation’s sovereign wealth fund said it’s maintaining its European investments. Speaking by telephone from New York, Galy also discusses the Japanese yen and his investment strategy. (Source: Bloomberg)