Euro Strength Unsettling The ECB


Short-Term Outlook:

Having dropped sharply after hitting a two-year high of US$1.38/EUR at the end of October, the euro is once again back on the upswing and is currently trading at US$1.35/EUR. We reiterate our view from the beginning of the year: the combination of passive monetary tightening (as a result of banks repaying LTRO loans) and an improvement in investor sentiment as the crisis shifts from the acute to chronic phase, will provide fundamental support to the euro. Even the slowdown in eurozone economic growth during the third quarter and murmurings of potential unorthodox monetary policy easing has been unable to curb euro strength in recent weeks. In the absence of another surprise monetary policy intervention in the coming months, we would expect the euro to hold up heading into 2014.

Core View:

Euro Still Holding Up
Eurozone - Euro Index & US$/EUR

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This article is tagged to:
Sector: Country Risk