25 May 2015
EUR/GBP: bearish target at 0.69 – TDS
FXStreet (Barcelona) - FX Strategists at TD Securities, expect EUR weakness to continue as a US rate hike this year nears, and expect EUR/GBP to make a move lower towards 0.69 levels.
Key Quotes
“EUR has come under attack after a renewed USD bid on Friday followed a stronger US CPI print which has pulled EURUSD through psychological support level of 1.10. The common currency is having trouble on the crosses this morning as well but with the US and UK markets closed for holidays, it is difficult to make much sense with thin liquidity conditions.”
“The latest rumblings out of the EU/Greece talks is that the latter is warning that there is no cash to pay the IMF a pair of instalments worth approximately EUR300 each over the first two weeks of June and thus raises the prospect of a default.”
“We have heard this story before and we tend to think that each of the parties involved that have supported Greece with funds will not let that happen but in the event of a default there have been significant firewalls in place to limit financial contagion especially as exposure to exotics has declined substantially. This still does not undermine the fact that this would probably be a significant financial market event but it could also mean that beyond the near-term pain the EUR-core could be perceived as “stronger” and it might also serve as an incentive for the troubled periphery to improve structural reforms as a Grexit would serve as the example for failure.”
“This is not our base-case scenario but as we approach key negotiating and funding deadlines, this sort of discussion will intensify. Ultimately, we think the primary trend in EURUSD is down and limited liquidity today is unlikely to pull us significantly lower from the 1.0980 level at time of writing but it may keep the common currency under pressure.”
“We like betting on lower EURGBP as well, and eye the 0.69 level over the coming months—especially if the June FOMC confirms that a 2015 hike is still on (our base case still).”
Key Quotes
“EUR has come under attack after a renewed USD bid on Friday followed a stronger US CPI print which has pulled EURUSD through psychological support level of 1.10. The common currency is having trouble on the crosses this morning as well but with the US and UK markets closed for holidays, it is difficult to make much sense with thin liquidity conditions.”
“The latest rumblings out of the EU/Greece talks is that the latter is warning that there is no cash to pay the IMF a pair of instalments worth approximately EUR300 each over the first two weeks of June and thus raises the prospect of a default.”
“We have heard this story before and we tend to think that each of the parties involved that have supported Greece with funds will not let that happen but in the event of a default there have been significant firewalls in place to limit financial contagion especially as exposure to exotics has declined substantially. This still does not undermine the fact that this would probably be a significant financial market event but it could also mean that beyond the near-term pain the EUR-core could be perceived as “stronger” and it might also serve as an incentive for the troubled periphery to improve structural reforms as a Grexit would serve as the example for failure.”
“This is not our base-case scenario but as we approach key negotiating and funding deadlines, this sort of discussion will intensify. Ultimately, we think the primary trend in EURUSD is down and limited liquidity today is unlikely to pull us significantly lower from the 1.0980 level at time of writing but it may keep the common currency under pressure.”
“We like betting on lower EURGBP as well, and eye the 0.69 level over the coming months—especially if the June FOMC confirms that a 2015 hike is still on (our base case still).”