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Forex pairs in this Article » EUR/USD, GBP/USD (New York) - According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “Given the Fed's recent statement and yesterday's news, the sensible trade seems to be long EUR/UK rates vs. US and to be long the Dollar against the Euro and Sterling.”

Indeed, “our rates and FX strategists have been in favor of this bias in their recent notes. While we would agree with this in the near-term we can't help but think that the Fed will become more dovish as the year progresses and that such trades have a shelf life of weeks not several months. This won't be an overnight change from the Fed but will evolve with the data and from market signals.” the analysts add.

Ever since the financial crisis started we've been of the opinion that once money printing started it would be very difficult to reverse the process and that balance sheets around the world will eventually be a decent size bigger than they are even today and that unconventional policy will probably last well into the second half of the decade across many parts of the globe. Whether it's the right thing to do is irrelevant but with very low nominal growth and with very high and still growing total debt, such an outcome seems inevitable to us. A 1-handle on 10 year Treasuries again at some point before year-end wouldn't surprise us even if there were volatility first.
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