18 Dec 2014
EUR/USD bearish bias – BTMU
FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, sees downward pressure gradually rebuilding on the EUR/USD pair, anticipating the stability period of the pair to end.
Key Quotes
“Downward pressure is gradually rebuilding on the EUR/USD rate which is likely to soon bring an end to the recent period of stability over the last couple of months. Yesterday’s FOMC meeting clearly highlighted that monetary policies between the ECB and Fed are likely to diverge significantly next year. The Fed remains on course to begin raising rates from the middle of next year.”
“In contrast, the ECB is set to embark upon even more aggressive monetary easing from early next year. The ongoing drop in market-based long-term inflation expectations which are moving further below the ECB’s target are reinforcing the case for more aggressive monetary easing.”
“We continue to expect the ECB to implement QE in January which should weigh further on the euro. Recent developments in Russia which is now experiencing a full-blown currency crisis are also likely to reinforce the widening economic divergence between the euro-zone and US. A deeper economic contraction in Russia will lead to more material negative spill-over effects for the euro-zone economy dampening the already weak growth outlook.”
“In contrast, any negative effects on the US economy are likely to be limited which should continue to grow more strongly. However as we approach the less liquid holiday period, it is possible that positioning and technical factors could begin to have a greater influence than fundamentals.”
Key Quotes
“Downward pressure is gradually rebuilding on the EUR/USD rate which is likely to soon bring an end to the recent period of stability over the last couple of months. Yesterday’s FOMC meeting clearly highlighted that monetary policies between the ECB and Fed are likely to diverge significantly next year. The Fed remains on course to begin raising rates from the middle of next year.”
“In contrast, the ECB is set to embark upon even more aggressive monetary easing from early next year. The ongoing drop in market-based long-term inflation expectations which are moving further below the ECB’s target are reinforcing the case for more aggressive monetary easing.”
“We continue to expect the ECB to implement QE in January which should weigh further on the euro. Recent developments in Russia which is now experiencing a full-blown currency crisis are also likely to reinforce the widening economic divergence between the euro-zone and US. A deeper economic contraction in Russia will lead to more material negative spill-over effects for the euro-zone economy dampening the already weak growth outlook.”
“In contrast, any negative effects on the US economy are likely to be limited which should continue to grow more strongly. However as we approach the less liquid holiday period, it is possible that positioning and technical factors could begin to have a greater influence than fundamentals.”