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EUR Rates Hit Fresh Lows Below Zero – RBS

EUR/USD managed to somewhat stabilize after the big falls, but we have to note the background; an ongoing drop in rates, and now below zero.

The team at RBS  sheds some light on this phenomenon:

Here is their view, courtesy of eFXnews:

Cash rates in the Eurozone have continued to sink below zero to new record lows; 3mth OIS is at -12bp, notes RBS.

“Much has been made of the ECB Council Member Benoit Coeure’s speech at a hedge fund gathering on Monday, released to the public on Tuesday. The focus was on his comment that the ECB intends to front load bond purchases this month and next to compensate for less liquid summer markets. But the crux of his speech was about how the theoretical zero bound for cash rates is actually substantially below zero and policy can crush rates across the curve lower to achieve more policy easing if required,” RBS adds.

“Indeed cash rates in the EUR are settling below zero across the front of the curve. As we have contended for some time this policy is likely to make the EUR very cheap, driving cash out of EUR into other currencies,” RBS argues.

EUR cash rate crush euro dollar ECB balance sheet

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.