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Forex Flash: ECB maintains straight line – Goldman Sachs

FXstreet.com (Barcelona) - The ECB has established a very easy monetary policy stance: market overnight rates are close to zero and the liquidity situation is ample. However, “owing to impairments to monetary policy transmission stemming from the fragmentation of European financial markets, this easy policy stance is not being passed through to the real economy in the periphery, where stimulus is most needed.” notes the Economics Research Team at Goldman Sachs.

In the eyes of the ECB, cutting policy rates in this context is largely futile, as pass-through is so modest. For the ECB, it is better to promote the reactivation and reintegration of peripheral credit markets, so as to reestablish monetary transmission. Moreover, as financial systems in the Euro area are bank-centered, the ECB should concentrate on improving bank credit availability when attempting to reinvigorate policy pass-through.

Forex Flash: Central banks highlight week ahead – Westpac

The EUR is facing multiple wounds, as opportunities to sell strength likely few and far between. According to Global FX Strategist Sean Callow at Westpac, “Our 1-month 1.2700 target is revised to 1.2500 – suspect ECB plays a steady hand next week, but EUR should trade heavily into the meeting on heightened easing speculation amid disappointing PMIs/IFO, not to mention the negative confidence shock still reverberating from Cyprus.
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Forex: EUR/USD finds support around 1.2810/15

The single currency is giving away some pips at the moment, hovering over the area of 1.2810/15, as thin trade and lack of market-movers dominate the session so far...
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