23 Sep 2013
Flash: EUR/USD: EU-US spreads need to contract to sustain the EUR rally - TD Securities
FXstreet.com (Córdoba) - EUR/USD may see further modest gains as a consequence of the Fed’s decision to refrain from tapering asset purchases but the benign policy backdrop really favours prorisk, carry trades, said the TD Securities analyst team at its weekly report.
Key Quotes
“The bottom line from an FX perspective is that the very cautious Fed will put the USD on a somewhat lower path over the next few weeks than we had expected”.
“Tapering remains possible later this year but early 2014 is, we think, a more likely start point. Near-term, US yields will ease and the USD will suffer as a consequence”.
“While short-term (2-year) Eurozone-US rate spreads remain within recent ranges, EUR/USD is likely to struggle to improve on the February high around 1.37. Spot looks to have overshot ‘fair value’ based on spreads by a margin (two big figures or so) already. Either spot has to drop back or spreads need to contract more sharply to sustain the EUR rally”.
Key Quotes
“The bottom line from an FX perspective is that the very cautious Fed will put the USD on a somewhat lower path over the next few weeks than we had expected”.
“Tapering remains possible later this year but early 2014 is, we think, a more likely start point. Near-term, US yields will ease and the USD will suffer as a consequence”.
“While short-term (2-year) Eurozone-US rate spreads remain within recent ranges, EUR/USD is likely to struggle to improve on the February high around 1.37. Spot looks to have overshot ‘fair value’ based on spreads by a margin (two big figures or so) already. Either spot has to drop back or spreads need to contract more sharply to sustain the EUR rally”.