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Forex pairs in this Article » EUR/USD, USD/CHF (Barcelona) - Danske Bank Strategists comments that following the relatively hawkish message from the ECB yesterday it does not seem that EUR money-market rates will fuel a sustained move lower ahead of New Year.

Key Quotes

“However, we emphasise that if our economists are right in projecting a euro-zone disinflation surprise to be delivered in January and if the ECB reacts to this with a deposit cut (to negative territory), EUR will most certainly suffer as this would have a noticeable impact on EONIA rates and mark a significant change in stance with rates no longer mentally capped at the zero level.”

“As a result, the impact on the single currency could be considerable as this would open up for the short end of the EONIA curve to move to even lower levels.”

“At the same time though, this would likely also steer (further) interest in euro-zone peripherals in a search for yield; this could in itself dampen the downside in EUR/USD. However, upside in e.g. USD/CHF should be sustained in this case as Swiss capital outflows could accelerate.”
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