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EUR/USD to move even lower in the coming months amid Fed/ECB divergency - UBS

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Oct 29, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Córdoba) - The Federal Reserve kept the federal funds target rate unchanged at 0–0.25% at its October meeting. The UBS analyst team expect the EUR/USD to move even lower in the coming months, as the Fed prepares for the first rate hike while the European Central Bank works on its next easing steps.

    Key Quotes

    “The post-meeting statement gave more clues about the current thinking of the policy-board members than most market participants would have thought. The Fed said clearly that there is a good chance of the first hike in the key policy rate since the financial crisis being delivered at the December meeting”.

    “As a result, the US dollar rallied strongly: the EURUSD dropped more than 1% within 10 minutes of the statement’s release, trading below 1.10 for the first time since August. We expect the EURUSD to move even lower in the coming months, as the Fed prepares for the first rate hike while the European Central Bank works on its next easing steps”.

    “The Fed introduced an explicit mention of the next meeting in the statement, which it had not done before. To be clear, the Fed did not pre-commit to moving in December. However, it clearly raised the probability of the move coming earlier than markets had priced in before the statement’s release, which was well into 2016”.

    We expect the US dollar to continue to perform well in the coming weeks”.
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