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30 Jun 2015
EUR/USD: bearish outlook, even despite Greece - BBH
FXStreet (Barcelona) - Analysts at Brown Brothers Harriman explained that, in the medium and longer-term, they expect that the divergence between the trajectory of Federal Reserve and ECB policy to push the euro lower.
Key Quotes:
"The Federal Reserve is expected to raise rates before the end of the year (the market has this almost fully discounted, looking at the pricing of the Fed funds futures). The ECB's bond buying program (QE) is expected to continue through September 2016. After a sharp downtrend in H2 14 through most of Q1 15, the euro has been in a broad trading range between about $1.08 and $1.15."
"In the short-term, risk of a broader disruption in EMU, appears to have spurred demand for euros a precaution to secure funding. In essence, many businesses and investors have borrowed euros. A sharp crisis would risk the ability to service the euro-denominated obligations. The purchases of euro denominated assets by sterling, yen or dollar based investors has frequently been financed by euro funding (borrowings)."
"There have been a few days over the last few months where Greek developments had a material impact on the direction of the euro, but this seemed to be short-lived. The euro recorded a 12-year low in mid-March near $1.0460. The recent high was recorded two months later near $1.1470. The 100-day moving average comes in near $1.1050."
Key Quotes:
"The Federal Reserve is expected to raise rates before the end of the year (the market has this almost fully discounted, looking at the pricing of the Fed funds futures). The ECB's bond buying program (QE) is expected to continue through September 2016. After a sharp downtrend in H2 14 through most of Q1 15, the euro has been in a broad trading range between about $1.08 and $1.15."
"In the short-term, risk of a broader disruption in EMU, appears to have spurred demand for euros a precaution to secure funding. In essence, many businesses and investors have borrowed euros. A sharp crisis would risk the ability to service the euro-denominated obligations. The purchases of euro denominated assets by sterling, yen or dollar based investors has frequently been financed by euro funding (borrowings)."
"There have been a few days over the last few months where Greek developments had a material impact on the direction of the euro, but this seemed to be short-lived. The euro recorded a 12-year low in mid-March near $1.0460. The recent high was recorded two months later near $1.1470. The 100-day moving average comes in near $1.1050."