In view of Greg Gibbs, Analyst at Amplifying Global FX Capital, the case for a further deep fall in the EUR may also be limited by its significant current account surplus and limited room to adjust monetary policy.
Key Quotes
“The ECB is likely to proceed with tapering its QE policies in October and January and rely largely on its rates policy from here on out.”
“Rate hike expectations have been lowered significantly for the EUR, and there is unlikely to be any further ECB policy maneuvres unless there is a return to EUR crisis mentality.”
“While this cannot be ruled out, the market may fear contagion to US markets and rates policy that undermines the USD as much, if not more, than the EUR. As we have found in past episodes in the EUR crisis, a risk of default in the periphery does not always lead to capital flight from the EUR.”
“We need to be aware now of the risks of negative feedback from troubles in the global economy to the US economy and financial markets. Such considerations may result in a weaker USD and a more stable EUR.”
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