8 Dec 2014
Risks being skewed to greater weakness for the EUR – DB
FXStreet (Barcelona) - The Deutsche Bank Team sees more downside to EUR with the risks being skewed to greater, rather than lesser weakness, in the coming year.
Key Quotes
“Our forecasts for EUR/USD remain unchanged into year-end and beyond. Near-term we see risks that the recent EUR/USD drop takes a pause, with market positioning very extended, real yield fair value still in the high 1.20s, and ECB expectations running ahead of what was delivered this Thursday.”
“Going out to next year, we see more downside to the currency with the risks being skewed to greater, rather than lesser weakness. First, ECB QE remains our baseline most likely delivered in January. The intended effects are likely to be larger and more protracted than equivalently-sized policies in the US or Japan due to the presence of negative rates. Second, we expect Fed rate lift-off to materialize over the course of H2, with the dollar historically showing a strong appreciating trend into the first central bank rate hike.”
“Finally, we believe next year will mark the beginning of broader capital flow shifts into the US fuelled by persistent growth and increasing monetary policy divergence.”
Key Quotes
“Our forecasts for EUR/USD remain unchanged into year-end and beyond. Near-term we see risks that the recent EUR/USD drop takes a pause, with market positioning very extended, real yield fair value still in the high 1.20s, and ECB expectations running ahead of what was delivered this Thursday.”
“Going out to next year, we see more downside to the currency with the risks being skewed to greater, rather than lesser weakness. First, ECB QE remains our baseline most likely delivered in January. The intended effects are likely to be larger and more protracted than equivalently-sized policies in the US or Japan due to the presence of negative rates. Second, we expect Fed rate lift-off to materialize over the course of H2, with the dollar historically showing a strong appreciating trend into the first central bank rate hike.”
“Finally, we believe next year will mark the beginning of broader capital flow shifts into the US fuelled by persistent growth and increasing monetary policy divergence.”