13 May 2015
The case for seasonal EURUSD underperformance - TDS
FXStreet (Guatemala) - Analysts at TD Securities explained that the case for seasonal EUR/USD underperformance is a lot less compelling this year for a number of reasons.
Key Quotes:
"First, the Eurozone economy is outperforming expectations and we think momentum will persist through the year as ECB stimulus, which has a net positive policy impulse through the next year, appears to be benefitting the economy."
"Secondly, if US growth is not as robust as the market perceives, the potential to delay the Fed rate hikes becomes nontrivial and along with it, a delay in the resumption of the USD bull trend."
"Third, given the improving economy, the perceived benefit of ECB stimulus and lower risk of financial contagion (much of Greece’s debt is effectively firewalled and much lower cross-border contagion from exotics), sovereign stresses are much less acute this year. This would imply that the market may be less vulnerable to headline risk regarding the Eurozone/Greek drama especially since it has become commonplace to expect a last minute resolution and as such, the case for EUR/USD to be pressured lowered may be subdued or potentially mitigated because ECB stimulus has wetted risk appetite."
Key Quotes:
"First, the Eurozone economy is outperforming expectations and we think momentum will persist through the year as ECB stimulus, which has a net positive policy impulse through the next year, appears to be benefitting the economy."
"Secondly, if US growth is not as robust as the market perceives, the potential to delay the Fed rate hikes becomes nontrivial and along with it, a delay in the resumption of the USD bull trend."
"Third, given the improving economy, the perceived benefit of ECB stimulus and lower risk of financial contagion (much of Greece’s debt is effectively firewalled and much lower cross-border contagion from exotics), sovereign stresses are much less acute this year. This would imply that the market may be less vulnerable to headline risk regarding the Eurozone/Greek drama especially since it has become commonplace to expect a last minute resolution and as such, the case for EUR/USD to be pressured lowered may be subdued or potentially mitigated because ECB stimulus has wetted risk appetite."