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31 Mar 2015
EUR/USD seen at 1.05 – JP Morgan
FXStreet (Edinburgh) - The bearish outlook remains entrenched around the single currency, with the possibility to drag
Key Quotes
“It is well documented that the Euro area has been experiencing record bond market outflows since last May, when the ECB first began discussing its plans to increase its balance sheet materially”.
“This outflow has been central to our and everyone else’s negative view on the currency. But as the ECB began to implement QE this month, we have avoided extreme EUR/USD targets for two reasons: (1) the Fed might never follow through on the rate expectations that seemed embedded into the dollar’s high level; and (2) the combination of relatively cheap Euro area equities plus an accelerating economy might attract offsetting flows into the equity market”.
“We retain bearish euro forecasts this year (1.05) on the expectation of eventual Fed tightening, but we’re still avoiding the extreme scenarios for 2015 as Europe’s upturn creates flow offsets through the equity market”.
Key Quotes
“It is well documented that the Euro area has been experiencing record bond market outflows since last May, when the ECB first began discussing its plans to increase its balance sheet materially”.
“This outflow has been central to our and everyone else’s negative view on the currency. But as the ECB began to implement QE this month, we have avoided extreme EUR/USD targets for two reasons: (1) the Fed might never follow through on the rate expectations that seemed embedded into the dollar’s high level; and (2) the combination of relatively cheap Euro area equities plus an accelerating economy might attract offsetting flows into the equity market”.
“We retain bearish euro forecasts this year (1.05) on the expectation of eventual Fed tightening, but we’re still avoiding the extreme scenarios for 2015 as Europe’s upturn creates flow offsets through the equity market”.