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Talk of euro parity with US dollar heats up

Aris Messinis | AFP | Getty Images

The euro versus the U.S. dollar hitting $1.0843 Wednesday reignited a debate among traders over whether the currency will trade in parity with the dollar before the end of the year.

The euro zone currency has been steadily moving down on European Central Bank President Mario Draghi's dovish commentary. Wednesday, the euro reacted to hawkish comments from Fed Chair Janet Yellen, suggesting a U.S. central bank rate hike could come in December.

Over the summer, the Fed cited international developments — particularly weakness in emerging markets and China — as a concern. But the story has changed over the past month with China cutting rates and Europe suggesting it may ease further.

"It seemed like a coordinated response from Europe and China to ease monetary policy while the U.S. tightens," said Duncan Wrigley at NSBO Bank.

Given the recent stabilization in the emerging market story and Europe taking a proactive approach to addressing its economic headwinds, some economists think the Federal Reserve is moving toward liftoff.

So what does that mean for the euro/dollar pair?