Forex Flash: The ugly and shocking euro
This news is the second part of: Who is asking the bailout? EFSE talks fuel Euro bullishness
FXstreet.com (San Francisco) - Deutsche Bank says it is time to turn bullish EUR and recommends buying EUR vs. ZIRP currencies. "It's now time to turn tactically bullish EUR vs the other ZIRP currencies: USD, JPY and GBP," says DB in a research note. "Target 1.27 in EURUSD, 100 in EURJPY and 0.81 in EURGBP."
DB explains that it has become more optimistic in the near-term for three reasons: (1) "Yesterday's ECB announcement was significant," (2) "Expectations are too low, market is too short euros," and (3) "Markets approaching 'theme fatigue' threshold."
Goldman Sachs is "bearish on both USD and EUR" according to a recently published report, "EUR-USD is the usual market proxy for the performance of both the USD and the EUR. So, with the fall in the EUR against the USD, the USD is rallying right? Wrong. What seems to be happening is that the market is selling both the EUR and the USD."
"Looking at the Broad Dollar index, excluding the move in EUR-USD, we see that there is wide-spread selling of the USD," continues Goldman Sachs' report. "Likewise, the decline in the trade-weighted EUR index, since the beginning of July, shows that the EUR is also being sold. Both are down roughly 2% since June against their main trading partners."
This phenomenon "would help also explain the compression in yields in the EM world," continues Goldman Sachs, and "why GBPUSD is so high despite a deteriorating economic backdrop."
"This move out of EUR and USD could also shed light on why the AUD remains extremely buoyant despite rate cuts, a Chinese slowdown and a fall in commodity prices," concluded Goldman Sachs.
Finally, the Westpac's FX and rates Strategy teams commented in a paper released on Friday that "with the fullness of time, markets will come to understand that we saw deep and meaningful developments from the ECB yesterday."
"Just as markets were ultimately wrong to sell risk in Dec 11/ Jan 12 between LTRO 1 and 2, they will be wrong again," stated Westpac. "However, in the short term, they will be right."
Westpac "expect peripheral bond markets to continue to sell off. The bank expects the euro "to continue to sell off."
FXstreet.com (San Francisco) - Deutsche Bank says it is time to turn bullish EUR and recommends buying EUR vs. ZIRP currencies. "It's now time to turn tactically bullish EUR vs the other ZIRP currencies: USD, JPY and GBP," says DB in a research note. "Target 1.27 in EURUSD, 100 in EURJPY and 0.81 in EURGBP."
DB explains that it has become more optimistic in the near-term for three reasons: (1) "Yesterday's ECB announcement was significant," (2) "Expectations are too low, market is too short euros," and (3) "Markets approaching 'theme fatigue' threshold."
Goldman Sachs is "bearish on both USD and EUR" according to a recently published report, "EUR-USD is the usual market proxy for the performance of both the USD and the EUR. So, with the fall in the EUR against the USD, the USD is rallying right? Wrong. What seems to be happening is that the market is selling both the EUR and the USD."
"Looking at the Broad Dollar index, excluding the move in EUR-USD, we see that there is wide-spread selling of the USD," continues Goldman Sachs' report. "Likewise, the decline in the trade-weighted EUR index, since the beginning of July, shows that the EUR is also being sold. Both are down roughly 2% since June against their main trading partners."
This phenomenon "would help also explain the compression in yields in the EM world," continues Goldman Sachs, and "why GBPUSD is so high despite a deteriorating economic backdrop."
"This move out of EUR and USD could also shed light on why the AUD remains extremely buoyant despite rate cuts, a Chinese slowdown and a fall in commodity prices," concluded Goldman Sachs.
Finally, the Westpac's FX and rates Strategy teams commented in a paper released on Friday that "with the fullness of time, markets will come to understand that we saw deep and meaningful developments from the ECB yesterday."
"Just as markets were ultimately wrong to sell risk in Dec 11/ Jan 12 between LTRO 1 and 2, they will be wrong again," stated Westpac. "However, in the short term, they will be right."
Westpac "expect peripheral bond markets to continue to sell off. The bank expects the euro "to continue to sell off."
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