This news is the second part of:
Who is asking the bailout? EFSE talks fuel Euro
FXstreet.com (San Francisco) - Deutsche Bank says it is time to
turn bullish EUR and recommends buying EUR vs. ZIRP currencies.
"It's now time to turn tactically bullish EUR vs the other ZIRP
currencies: USD, JPY and GBP," says DB in a research note. "Target
1.27 in EUR/USD, 100 in EUR/JPY and 0.81 in EUR/GBP."
DB explains that it has become more optimistic in the near-term for
three reasons: (1) "Yesterday's ECB announcement was significant,"
(2) "Expectations are too low, market is too short euros," and (3)
"Markets approaching 'theme fatigue' threshold."
Goldman Sachs is "bearish on both USD and EUR" according to a
recently published report, "EUR-USD is the usual market proxy for
the performance of both the USD and the EUR. So, with the fall in
the EUR against the USD, the USD is rallying right? Wrong. What
seems to be happening is that the market is selling both the EUR
and the USD."
"Looking at the Broad Dollar index, excluding the move in EUR-USD,
we see that there is wide-spread selling of the USD," continues
Goldman Sachs' report. "Likewise, the decline in the trade-weighted
EUR index, since the beginning of July, shows that the EUR is also
being sold. Both are down roughly 2% since June against their main
This phenomenon "would help also explain the compression in yields
in the EM world," continues Goldman Sachs, and "why GBP/USD is so
high despite a deteriorating economic backdrop."
"This move out of EUR and USD could also shed light on why the AUD
remains extremely buoyant despite rate cuts, a Chinese slowdown and
a fall in commodity prices," concluded Goldman Sachs.
Finally, the Westpac's FX and rates Strategy teams commented in a
paper released on Friday that "with the fullness of time, markets
will come to understand that we saw deep and meaningful
developments from the ECB yesterday."
"Just as markets were ultimately wrong to sell risk in Dec 11/ Jan
12 between LTRO 1 and 2, they will be wrong again," stated Westpac.
"However, in the short term, they will be right."
Westpac "expect peripheral bond markets to continue to sell off.
The bank expects the euro "to continue to sell off."