EUR: Up-Direction To Extend But An Adjustment Of Speed Is Possible – Nomura

Nomura FX Strategy Research argues that the trend in EUR appreciation is consistent with the direction of rate spreads, but the ECB reaction may be amplified by exogenous factors.

"After a likely tapering announcement in October, the FX market’s interest in ECB policy may decline, which could reduce EUR sensitivity to rate markets.

An adjustment in the speed of EUR appreciation is possible, but EUR’s high sensitivity to rates shows the direction of EUR is correct, especially as fundamental divergence suggests rate spreads are likely to catch up," Nomura argues.

"We thus see further room for EUR appreciation," Nomura concludes.

Source: Nomura Securities ResearchOriginal Article