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12 Jul 2013
Flash: EUR/USD unlikely to survive long above 1.3000 - BTMU
FXstreet.com (London) - Derek Halpenny, European Head of Global Market Research at the Bank of Tokyo Mitsubishi UFJ believes that despite supportive ECB commentary, EUR/USD is unlikely to survive long above 1.3000.
He begins by noting that ECB Executive Board member Coeure stated yesterday that the “forward guidance” by the ECB to leave rates low or lower for an “extended period” would be assessed at every meeting. He writes, “Of course, this is true but it certainly doesn’t instil much credibility in the commitment when there’s a feeling it could be altered at any given meeting. As this guidance has only just been announced,”
He believes that ECB members should be focused more on emphasising “extended period” rather than the flexibility of the commitment. He adds that ECB Vice President Constancio tried to do just that in Singapore today by stating that policy in the euro-zone must remain accommodative for a longer period of time than in the US.
Halpenny finishes by commenting that emphasising the need for greater accommodation than in the US will certainly help limit EUR/USD upside potential. Given our belief that the tapering timetable hasn’t changed, He writes, “EUR/USD above 1.3000 is unlikely to last long. We will be watching the LTRO repayment amounts today. Last week, there was no repayments at all from LTRO I – the first time that has happened possibly indicating a slowdown in the pace of repayments.
He begins by noting that ECB Executive Board member Coeure stated yesterday that the “forward guidance” by the ECB to leave rates low or lower for an “extended period” would be assessed at every meeting. He writes, “Of course, this is true but it certainly doesn’t instil much credibility in the commitment when there’s a feeling it could be altered at any given meeting. As this guidance has only just been announced,”
He believes that ECB members should be focused more on emphasising “extended period” rather than the flexibility of the commitment. He adds that ECB Vice President Constancio tried to do just that in Singapore today by stating that policy in the euro-zone must remain accommodative for a longer period of time than in the US.
Halpenny finishes by commenting that emphasising the need for greater accommodation than in the US will certainly help limit EUR/USD upside potential. Given our belief that the tapering timetable hasn’t changed, He writes, “EUR/USD above 1.3000 is unlikely to last long. We will be watching the LTRO repayment amounts today. Last week, there was no repayments at all from LTRO I – the first time that has happened possibly indicating a slowdown in the pace of repayments.