FXStreet (Łódź) - Sara Yates, Global Head of FX Strategy at J.P. Morgan Private Bank emphasizes that the research team's 1y EURUSD forecast of 1.33 is based upon rising US yields, not a falling EUR.

Key quotes

"In our opinion, the main reason the ECB is now raising the possibility of QE is that it wants to limit the upside on the EUR from its latest package of measures. These measures are designed to support euro area growth and inflation."

"This is good news for euro area assets. But the more people buy these assets on an unhedged basis, the more the ECB’s measures will also support the EUR!"

"To break this link between inflows and the currency, investors need to be encouraged to hedge. This is what we believe the ECB tried to do through its dovish language and particularly its comments about QE."

"However, in the June press conference itself, Draghi undermined this attempt by dismissing concerns around the strength of the EUR. Last week, the dovish tone was further diluted by news headlines that the ECB “will likely refrain from new measures for the next few months.”

"With the EONIA at just 1.5bps and QE unlikely, we think the downward pressure on the EUR from the ECB’s actions has run its course. Until US yields pick up we expect EURUSD to trade towards the top of its 1.33-1.38 range."

Related Articles
  1. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  2. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  3. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  4. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  5. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  6. Investing

    Financial News Comparison: Bloomberg Vs. Reuters

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  7. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  8. Forex Education

    The Top Uses For P2P Currency Exchange

    Peer-to-peer (P2P) currency exchange networks offer a viable and cheaper alternative for buying and selling currencies.
  9. Forex

    Steps To Open An Offshore Forex Account

    Here is a simple breakdown of how to open an offshore forex account for US-based users, including legal requirements.
  10. Entrepreneurship

    Top Forex Trading Apps

    A brief overview of the top apps that help forex traders with on time information, charts and more.

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!