One of the pushbacks we get to our weaker euro view is that the ECB will signal tapering this year preventing EUR/USD weakness. We don’t agree.
First, tapering is not necessarily bullish for a currency. When the Fed signaled taper in mid-2013 the dollar strengthened a lot against EM but it weakened against both the euro and yen.
Second, ECB tightening is not that simple. Not only would it steepen curves but it risks a return of redenomination risk that has been conveniently compressed by the ECB’s fight against deflation.
Finally, EUR/USD is not just about the ECB but also the Fed and the level of US yields...With the dollar having transitioned to a high-yielder and even more Fed hikes to come, the greenback should be doing a good job of attracting inflows and deflecting its use as a funding currency to both the euro and the yen.
Read more:
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.