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1 Nov 2013
Flash: EUR could remain weak in run up to ECB presser - BMO Capital Markets
FXstreet.com (Barcelona) - Stephen Gallo, European Head of Currency Strategy at BMO Capital Markets feels that the EUR should remain on the ‘feeble’ side in the run-up to the ECB press conference towards the end of next week, but the EUR weakness now poses a complex problem for the central bank.
Key Quotes
"The difficulty facing the ECB is to get the EUR devaluation to persist or extend beyond next week’s rate decision. Additional liquidity support is a EUR negative, but to the extent that it triggers more capital inflows or non-existent re-pricing of credit spreads, it can also be a EUR positive too."
"Additionally, some participants may still be nestled deep within Euro Area credit markets on expectations that the AQR will be rather smooth and painless."
"Aggressive ECB action now might force investors to remain of that view, but we’d be on the other side of that trade on a 3-6-month outlook."
Key Quotes
"The difficulty facing the ECB is to get the EUR devaluation to persist or extend beyond next week’s rate decision. Additional liquidity support is a EUR negative, but to the extent that it triggers more capital inflows or non-existent re-pricing of credit spreads, it can also be a EUR positive too."
"Additionally, some participants may still be nestled deep within Euro Area credit markets on expectations that the AQR will be rather smooth and painless."
"Aggressive ECB action now might force investors to remain of that view, but we’d be on the other side of that trade on a 3-6-month outlook."