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26 Apr 2013
Forex Flash: Euro remains stable into week close - BTMU
FXstreet.com (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the euro remains stable around the 1.3000 level versus the dollar as expectations continue to build for an ECB rate cut next week.
As he stated here this week, that is now his view, bringing the timing forward by a month. We still think the logical month would be June, coinciding with the updated forecasts but the rhetoric from numerous Council members can’t be ignored. He adds that Chancellor Merkel may well be correct to state that Germany should have higher rates based on its fundamentals, but equally he notes that the ECB can’t ignore the dire fundamentals elsewhere that is threatening its overall euro-zone price stability mandate. he continues to note that the Spanish unemployment rate at 27.2% equating to 6.2mn people out of work underlines the severity of the problems in the eurozone. There were 237,400 job losses in Q1. he writes, “Based on population comparisons that’s the equivalent of the US suffering a quarterly loss of over 1.4mn, a scale of loss only achieved around the time of the collapse of Lehman Brothers. The key question for the ECB is whether a rate cut will do much and in all likelihood other measures will also be required as the ECB attempts to fix the broken monetary policy mechanism. Euro stability will eventually give way, resulting in a more sustained slide in EUR/USD.”
As he stated here this week, that is now his view, bringing the timing forward by a month. We still think the logical month would be June, coinciding with the updated forecasts but the rhetoric from numerous Council members can’t be ignored. He adds that Chancellor Merkel may well be correct to state that Germany should have higher rates based on its fundamentals, but equally he notes that the ECB can’t ignore the dire fundamentals elsewhere that is threatening its overall euro-zone price stability mandate. he continues to note that the Spanish unemployment rate at 27.2% equating to 6.2mn people out of work underlines the severity of the problems in the eurozone. There were 237,400 job losses in Q1. he writes, “Based on population comparisons that’s the equivalent of the US suffering a quarterly loss of over 1.4mn, a scale of loss only achieved around the time of the collapse of Lehman Brothers. The key question for the ECB is whether a rate cut will do much and in all likelihood other measures will also be required as the ECB attempts to fix the broken monetary policy mechanism. Euro stability will eventually give way, resulting in a more sustained slide in EUR/USD.”