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Forex pairs in this Article » (Barcelona) - The Nomura strategy team have taken a look at upcoming events and trends across Europe and see a bearish bias ahead.

They begin by highlighting fiscal tightening, financial deleveraging and sovereign debt market tensions and that they suspect that they may lead to a deeper than expected recession. Further, they add that Spain risks delaying call for ECCL due to market stability and a ESM bank recap delay. Their baseline in this scenario is an ECCL will be called. After a phase of relative calm, they feel that markets will likely test the backstop and pressure should rebuild around weak sovereigns. Moreover, GDP contraction, higher non-performing loans and rising debt trajectories remain the key euro area challenges ahead and because they forecast a weak economic backdrop, they are retaining their bias for lower ECB rates (in June). Looking to the UK, the are expecting inflation to be sticky in the UK, albeit back in the right ballpark, but to slip below target during 2013 in the euro area. Finally, they feel that the UK will see a reaffirmation of aggressive BoE QE, liquidity and funding support in 2013.
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