US Dollar Overestimates Euro Shorts And Gains Again

Along with the spread of the global economic slowdown caused by the unexpected devaluation of the renminbi in August 11th, and the expectation of the depreciation of the renminbi, the arbitrage paction which borrowed the euro to buy the renminbi decreased significantly, and the euro reached its highest level of 1.1728 US dollars in 1 months since August 24th.

However, as the ECB's further relaxation of the policy is expected to resume, analysts' outlook for the euro has once again turned pessimistic.

Goldman Sachs analysts, including Robin Brooks, chief foreign exchange strategist, said in a report on Monday that the euro could fall by 1000 points because of the easing of the ECB's future, because the ECB is bound to step up its efforts to achieve inflation targets, and the ECB will only end the QE plan in mid 2017.

Last week's decision to raise interest rates did not add to the strength of the euro's bulls, which made the atmosphere more intense, as investors expected the ECB to be forced to further relax its monetary policy.

The delay in raising interest rates does not hide the fact that the Fed and the ECB separate their monetary policies.

In the face of signs of improvement in the US economy, many economists and investors still expect the fed to raise interest rates this year, while the ECB is expected to continue to implement QE, and even officials of the bank say they are prepared to expand the QE scale because the euro area's economic growth and inflation are all weak.

Prete, chief economist of the European Central Bank, said in an interview with Swiss newspaper last week that the European Central Bank is ready to revise or expand the quantitative easing policy of one trillion euros in the face of the intensification of emerging markets.

"Once it is necessary, it is important to emphasize that we will be quick and decisive," Prete said. "Although the global economic risks have increased significantly, the time has not yet arrived.

We have already revised our economic expectations, and we hope to prepare for action in case of need. "

After the speech, the euro's atmosphere was rekindled.

The euro fell below 1.12 on Tuesday, reaching a two week low, down nearly 300 from its 1.1460 high on Friday.

The euro / dollar risk reversal index, which measures the demand for foreign exchange options for a month and three months, shows that the euro is more than seven weeks.

In the future, the implied volatility of index of foreign exchange fluctuation also rises.

"We expect

The easing of the central bank will make the exchange rate break through the recent trading range and rekindle the euro's decline against the US dollar, "said Marvin Barth, European director of Barclay's foreign exchange strategy division.

"ECB's

We should refocus on the more obvious vulnerability of the euro area and the further weakness of the euro. "

By contrast, on the other side of the US, the two Fed decision makers, including Lockhart, chairman of the Atlanta fed, made clear on Monday that it is likely to raise interest rates in 2015.

The federal funds futures market shows that the possibility of raising interest rates at FOMC meeting in December is 49%.

"Since more investors are betting that the Fed may raise interest rates in December, we think the euro will bear more pressure against the US dollar," said Yujiro Goto, a foreign exchange strategist at Nomura in London.