“On Wednesday, come into effect measures to reduce the rates announced last week. The key question for the currency markets – as reserve managers react to what interest rates will be negative.
Clearly, the incentive this time will be different. Room for maneuver is also likely to be insufficient, and in this case there are several options to choose from:
(1) save the euro-cash and pay all potential fees
(2) go beyond the curve, trying to get some profit,
(3) to sell euros.
The third option seems the least likely, as foreign exchange rates are set once a year, and they are not so easy to change.
However, there is an opportunity to sell the euro at extreme levels, due to the fact that net flows in euro diversification stopped more than a year ago. This helps us to maintain the “bearish” view on the euro and we adhere to forecast that the EURUSD will reach 1.25 by the end of 2014. “Follow us in social media: