Forex Flash: EUR/USD rally to be short lived – BBH

FXstreet.com (Córdoba) - At the EU Summit policymakers have agreed on a few new measures leading to renewed positive market sentiment and a higher euro, notes the BBH analyst team. "However, this is unlikely to be a game changer for the single currency and we expect any rally to be short lived".

"The most important step taken thus far is the agreement that the EFSF/ESM will be used to support sovereign debt. The agreement will allow the ESM to recapitalize banks under the auspices of the MoU. The MoU is a set of reform conditions that will include monitoring of reforms at the EU level once signed by European policymakers", says BBH. "This is unlikely to occur until later in the year so, in the near-term, any aid provided to Spanish banks will continue to increase the debt burden for the sovereign".

"Given the euro zone weak economic fundamentals and the potential for a rate cut at next week's ECB meeting, we expect the euro to remain under pressure", they add.