FXstreet.com (Córdoba) - The further the prospect of additional quantitative easing measures (QE3) on the part of the Fed fades into the distance, the more the dollar is able to appreciate, according to Ulrich Leuchtman, analyst at Commerzbank. This means that positive US data remains decisive for the greenback.
"While an increase of the monetary base was an appropriate tool for injecting liquidity into a dysfunctional financial market during the financial crisis of 2008, such a policy is increasingly inappropriate the more it only aims to target real economic objectives".
"The smaller the risk for such a scenario (Fed launching QE3) the more EUR-USD can come under pressure", the analyst said. "Therefore our advice: Remain USD bullish as long as QE3 risk is abating, but cut that position as soon as QE3 risk re-emerges".
"While an increase of the monetary base was an appropriate tool for injecting liquidity into a dysfunctional financial market during the financial crisis of 2008, such a policy is increasingly inappropriate the more it only aims to target real economic objectives".
"The smaller the risk for such a scenario (Fed launching QE3) the more EUR-USD can come under pressure", the analyst said. "Therefore our advice: Remain USD bullish as long as QE3 risk is abating, but cut that position as soon as QE3 risk re-emerges".
