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EUR: Time For Draghi To Save The World, Again –

The recent talk of downside risks sent EUR/USD down but it quickly recovered since. Will Draghi deliver next time? The team at Credit Agricole discusses:

Here is their view, courtesy of eFXnews:

The latest market turmoil signalled growing fears about the outlook of the global economy. These concerns are exacerbated by the overhang of USD-debt that fuels fears about sovereign and corporate defaults, and chokes the recovery.

The Eurozone debt markets with the help of the ECB could act as a circuit breaker and continue to offer international borrowers a way out of their increasingly expensive USD-debt. This should help contain the risk of a global debt crisis for now in our view.

Foreign borrowers should continue to issue EUR-debt in the Eurozone, and convert the proceeds into USD in the FX spot and forward market, keeping EUR/USD under selling pressure.

The ‘EUR-funding’ trades should also weaken the positive correlation between EUR and risk aversion. Indeed, recent bouts of risk aversion have boosted the appeal of EUR-funding relative to USD-funding, attracting more EUR-sellers.

Gauging the USD debt overhand EM USD credit

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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.