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Forex Flash: Euro corrects lower following Buba Pres comments - BTMU

FXstreet.com (Barcelona) - Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the euro has corrected lower with EUR/USD falling back towards the 1.30-level yesterday following dovish comments from Bundesbank President Weidmann and former ECB Executive Board member Bin Smaghi.

He notes that President Weidmann gave a more explicit signal that the ECB is on the verge of lowering its refi rate should incoming economic data continue to disappoint in the near-term although he played down the stimulatory impact of such a shift in policy. Further, he sees that ECB President Draghi had already stated that the ECB was ready to act at their last policy meeting. He writes, “Euro selling also gained momentum following comments from former Executive Board member Bin Smaghi who stated that the ECB “have to find ways to avoid that the euro appreciates and actually try to make it depreciate” saying that he thought “they will do something…it’s unavoidable” with growth weaker in Europe than in Japan and the US.” With the ECB unwilling to engage in QE like the BoJ and Fed, Hardman feels that it remains unclear what the ECB could do to respond. he finishes by commenting that the Swedish krona also weakened yesterday as the Riksbank pushed back the timing of monetary tightening until the 2H of 2014 to help ease krona appreciation pressure as inflation is set to remain below target for longer than initially forecast. He writes, “A further rate cut is also possible ahead.”

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