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16 Jan 2015
EUR/USD depreciation may speed up to 1.12 - TDS
FXStreet (Bali) - EUR depreciation may sped up significantly from here, with TDS initial target between this and ECB QE of 1.12.
Key Quotes
"The SNB’s surprise decision to drop the floor opens up markets to new dynamics going forward."
"EUR depreciation can be particularly sped up from here, with our initial target between this and ECB QE of 1.12 in EURUSD and we will re-examine that level more formally over the coming week. It can also take some pressure off JPY appreciation in times of market stress as CHF can once again join the ranks of the safe havens—albeit one with a significantly negative interest rate as well as the persistent threat of SNB intervention."
"Trying to maintain the CHF floor in the context of significant and lengthy ECB sovereign bond buying would likely have been like trying to fit a square peg in a round hole, and with negative policy rates now more normal, that proves to be a more acceptable tool."
"This also opens up scope for a further round of a war of rate setting across Europe from the ECB, Norges Bank, Riksbank, and the SNB as well, with the latter adding likely further FX intervention into the mix."
"Ultimately, this decision could be seen as an SNB vote of confidence for both the sustainability of the strong USD trend and ultimate start of a Fed hiking cycle as well as the vote of confidence for the cross-border flow we will see in EUR postQE."
Key Quotes
"The SNB’s surprise decision to drop the floor opens up markets to new dynamics going forward."
"EUR depreciation can be particularly sped up from here, with our initial target between this and ECB QE of 1.12 in EURUSD and we will re-examine that level more formally over the coming week. It can also take some pressure off JPY appreciation in times of market stress as CHF can once again join the ranks of the safe havens—albeit one with a significantly negative interest rate as well as the persistent threat of SNB intervention."
"Trying to maintain the CHF floor in the context of significant and lengthy ECB sovereign bond buying would likely have been like trying to fit a square peg in a round hole, and with negative policy rates now more normal, that proves to be a more acceptable tool."
"This also opens up scope for a further round of a war of rate setting across Europe from the ECB, Norges Bank, Riksbank, and the SNB as well, with the latter adding likely further FX intervention into the mix."
"Ultimately, this decision could be seen as an SNB vote of confidence for both the sustainability of the strong USD trend and ultimate start of a Fed hiking cycle as well as the vote of confidence for the cross-border flow we will see in EUR postQE."