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Forex Flash: We expect the ECB to pursue further monetary easing measures - Soc Gen

FXstreet.com (Barcelona) - The EUR/USD finished the session down 116 pips at 1.3044. The pair has been stuck in a trading range for quite some time now, but some analysts see numerous reasons to view further declines.

According to Sebastien Galy, Senior Currency Strategist at Soc Gen, “The monetary transmission mechanism has broken down in the euro area. Worse than that, the disintermediation function of banks also appears to have taken a big hit. Negative interest rates could actually worsen the problem. They will not boost lending if there is weak demand for loans and/or banks are prepared to pay for safe deposits with the ECB rather than make loans that they fear will not be repaid”

He went on comment, “Furthermore, negative rates would hurt the profitability of financial institutions, unless they are accompanied by a material steepening of the yield curve. As such, it is no surprise that many market participants took the reference to negative rates as an indirect verbal intervention to weaken the euro. Verbal intervention or not, the most direct and dependable mechanism for negative rates to translate into higher economic activity is through a lower exchange rate boosting net exports. We expect the ECB to pursue further monetary easing measures that will translate into a weaker exchange rate, wittingly or not. We reiterate our Currency Wars and short euro basket trades”

Forex: USD/JPY, bulls officially staring at 101.00 from the rear mirror

USD/JPY has penetrated 101.00, where an option-related barrier was thought to be protecting the level. The exchange rate has topped out at a new 4-year high in 101.19, over 0.70% above its Thursday's NY close.
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Forex Flash: BoE on Hold, But Likely Another Split Vote – TD Securities

According to Jacquie Douglas, Senior Global Strategist at TD Securities, “The Bank of England left its policy rate and asset purchase target on hold today, as had been nearly unanimously expected, and as we had forecast in our most recent UK Quarterly. But with no statement, we won’t get any further information until next week’s Inflation Report (which will be Governor King’s last) and the minutes from today’s meeting in two weeks.”
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