Forex News FX markets have reached a rather confusing juncture, says UBS. If oil continues to decline or stays low, central banks in G10 will start to conclude inflation crisis is passing; in that case, "central banks such as the ECB will be able to start cutting rates in the coming months in order to deal with slowing growth. However, while a clear risk, we think it is too early to count oil out and would be more confident in the decline in oil prices if it was accompanied by lackluster stocks, as that would clearly imply falling demand was responsible for lower oil prices." Fluctuations in geopolitical risk premiums or long squeezes in oil, short squeezes in equity markets don't change igger picture. Still targets EUR/USD at 1.60 over 1 month amid U.S. financial market concerns, elevated eurozone inflation concerns; targets 1.53 over 3 months, "once we are more confident that oil's impact on headline inflation is moderating."
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