Forex Flash: ECB's new steps suggests a move into a 1.25-1.30 range - RBS
FXstreet.com (San Francisco) - The Week has started with the Euro trading higher and reaching 1-month highs at 1.2440 on the back of possibilities on Spain and/or Italy to ask for bailouts due to its unsustainable debt costs and the Draghi's comments on ECB disposal to intervene again in Eurozone domestic bond markets.
This possibilities "suggests the euro may squeeze higher now as extreme positions are lightened," according to Mansoor Mohi-uddin from UBS Bank. "But the likelihood of the ECB having to cut interest rates next month and the risk that it does not sterilize future bond purchases suggests a move into a 1.25-1.30 range for EURUSD will prove unsustainable."
"As a result EURUSD could squeeze higher above its current 1.20-1.25 range against the dollar this month," continues Mohi-uddin. "But we maintain our longer term 1.15 target as ECB balance sheet expansion will cyclically weaken the currency again - even if structural concerns about the Eurozone breaking up are reduced."
This possibilities "suggests the euro may squeeze higher now as extreme positions are lightened," according to Mansoor Mohi-uddin from UBS Bank. "But the likelihood of the ECB having to cut interest rates next month and the risk that it does not sterilize future bond purchases suggests a move into a 1.25-1.30 range for EURUSD will prove unsustainable."
"As a result EURUSD could squeeze higher above its current 1.20-1.25 range against the dollar this month," continues Mohi-uddin. "But we maintain our longer term 1.15 target as ECB balance sheet expansion will cyclically weaken the currency again - even if structural concerns about the Eurozone breaking up are reduced."
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