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Eurozone economic conditions disturbingly deteriorating again - BTMU

FXStreet (Łódź) - Derek Halpenny, European Head of Currency Strategy at the Bank of Tokyo Mitsubishi UFJ remarks that even though the Eurozone financial crisis has eased immensely since the introduction of OMT by ECB, the central bank will have to implement additional measures to prevent the area from falling into a new phase of the crisis.

Key Quotes

"We suspect that much of the relative monetary policy story is now priced in EUR/USD for now and the lack of downside for EUR/USD following the very weak industrial production data from Germany (coupled with the strong US JOLTS report) yesterday does back that view up. Still, the data was pretty shocking and the 4% drop in August was the largest drop since January 2009 during the worst phase for the global economy after the collapse of Lehman Brothers."

"It was also matched by a 5.7% drop in production in Hungary and a 5.2% drop in the Czech Republic. The IMF yesterday also slashed its growth forecast for Germany from 1.9% to 1.4% and cut growth projections for Italy and France too."

"The crisis in the euro-zone has certainly eased dramatically since OMT in 2012 but the improvement in the periphery from the OMT commitment is now being offset by a renewed deterioration in the core."

"The G20 Finance Ministers and Central Bankers’ gathering gets underway in Washington today and we expect to see France and Italy try to promote a shift in fiscal policy in Europe to something more expansionary in order to help lift growth in the euro-zone."

"ECB Draghi hinted at this at Jackson Hole and with the financial markets unimpressed (new record low for inflation expectations) with the ECB QE program details, something additional beyond monetary policy will be required in order to counter the increasing risks of a new phase in the euro-zone financial crisis."

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