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ECB should welcome a weaker EUR/USD - Rabobank

FXStreet (Guatemala) - Analysts at Rabobank suggested, in essence, one could say that the ECB should welcome a weakening of EUR/USD as long as it is the right kind of weakness.

Key Quotes:

"Currently, it is the wrong kind as expectations of Fed policy normalisation are feeding through into concern as regards the outlook for emerging markets (owing in large part to the exposure of borrowers there to dollar-denominated borrowing)."

"This, in turn, is helping to inform the weakness in commodities (EM being the most important marginal consumer of commodities) meaning the benefit to the ECB of a weaker euro is being countered by the lower cost of energy etc."

"Of course, one might argue lower commodity costs should be welcomed as they will serve to boost real domestic incomes. However, in so far as this weakness is driven by declining external demand this positive view must be tempered by a more gloomy outlook for international trade."

"At the very least, the impact of lower commodity prices remains up for debate which, with headline inflation close to zero and falling import prices threatening to push it lower, the ECB should (and clearly is) minded to act on a precautionary basis rather than simply hoping the Fed will do the lifting on its behalf. "

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