FXStreet (Delhi) – Research Team at Deutsche Bank, suggests that the end of 2015 was marked by the unusual combination of the Fed’s start of policy tightening, while the ECB delivered additional easing (albeit below heightened expectations) and there should be some partial policy convergence in 2016. Key Quotes • “The divergence between US and European monetary policy may have peaked. Our year-end forecasts have 10Y Bund at 1.1% and 10Y UST at 2.50%. • In Europe, absent an external shock, the market is likely to focus in H2 on the prospects of the ECB discussing (but not implementing) taper. The curve should steepen as the front-end should remain anchored. • In the US, the terminal rate priced by the market is arguably too low. However, the hikes priced for 2016 appear close to fair given the downside risks to core PCE due to the lagged impact of the USD. • There are several key risks to this outlook: the policy response in China, oil prices, fiscal and regulatory policies, the US credit cycle and (geo) political risks.” For more information, read our latest forex news.