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FXstreet.com (Barcelona) - The EUR/USD has shown a clear divergence from our measure of short-term fair value over the past month. According to FX Strategists Brian Kim and Brian Dangerfield at RBS, "The main driver of this divergence has been the movement in interest rate spreads. The traditional relationship between rate spreads and the EUR/USD has broken down over the past month, as EUR/USD continued to rally into December despite a collapse in its rate advantage vs. the USD over that time."

The drop in the EUR's rate advantage over the USD was, for the most part, a result of ECB President Draghi's revelation that the ECB had indeed discussed a negative deposit rate at its December meeting, potentially paving the way for further cuts in the ECB's key interest rates in early 2013.

Moreover, "We believe the divergence in the EUR/USD and our fair value estimate may be related to both positioning and year-end flows." they note. Looking at seasonal patterns dating back to 1995, the EUR tends to be among the stronger performers in December but is among the worst January performers historically. The USD, by contrast, is the second strongest G10 currency in January, behind only the CHF.

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