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Forex Flash: Reasons why EUR should depreciate over coming months - RBS

FXstreet.com (Barcelona) - RBS FX strategist David Simmonds just laid out in a report sent out to clients a plethora of reasons potentially weighing in the EUR/USD exchange rate over coming months.

According to David: "The Euro area growth prognosis is dire and there is more ECB easing on the way. We expect a refi rate cut by June, alongside the new Staff forecasts. This is likely to be ineffective, of course, as a means of stimulating growth. But the ECB will feel the need to be seen to be doing something.

"Also rates strategy colleagues re-emphasise that 2Y Germany yields look cheap at 0.02%! Not a case of how low can it go, but how negative (the answer we think is deeply negative). So 2Y rate spreads can be a driver of EUR/USD lower over time" he adds.

David also touches on capital controls inside a currency union, saying it is not viable, and that "this potentially creates a deeply dangerous precedent set for the single currency and a key reason why we expect EUR to depreciate over coming months."

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