Filed Under:
Forex pairs in this Article » EUR/USD (Bali) - Greg Gibbs, FX Strategist at RBS, tries to shed a light on the recent strength displayed by the Euro, saying it may be may be flow driven to extremes.

Key Quotes

"Perhaps the EUR received support from capital flight from Eastern European currencies with weak performances in several, most notably TRL. And RUB. However, we might also wonder if economic and financial stress developing in the East of the Eurozone will not at some point spill over to a weaker outlook and renewed crisis fears in the Eurozone."

"It is hard, therefore, to be confident the strength in EUR against the USD and GDP will be sustained in an environment of increasing emerging market stress. It relies on sustained confidence that the crisis fears within the Eurozone remain subdues and the Fed will be more likely to delay policy normalization."

"The bottom line is that EUR remains difficult to judge and may be flow driven to extremes. At this stage it may appear a bit too strong relatively to its inflation and economic outlook, and risks that this at some point damages confidence in the periphery debt markets. But the most recent economic reports are firmer, it retains a very strong current account and it is not at extremes, sitting mid-range over the last four months."
comments powered by Disqus