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26 Mar 2013
Forex Flash: Post-Cyprus: gradual Euro weakness remains the central case - Nomura
Nomura strategist Jens Nordvig notes that news from Cyprus this weekend was substantially better than the initial bailout news from the last weekend.
He feels that it seems that t system wide deposit haircuts have been avoided. In addition, issues related to capital controls may also be less problematic than initially feared. But these are tactical considerations. He feels that the medium-term picture remains Euro negative and the recent news flow points to more pronounced Eurozone growth under performance and the Eurozone banking system is not showing any clear evidence of improvement. He finishes by commenting that, “In fact, it seems that the negative feedback loop between weak growth and banking sector fragility remains in place, despite more resilient sovereign bond markets. Moreover, the Dutch statement in relation to bank resolution is not going to be helpful for markets and lending conditions in the near-term.”
He feels that it seems that t system wide deposit haircuts have been avoided. In addition, issues related to capital controls may also be less problematic than initially feared. But these are tactical considerations. He feels that the medium-term picture remains Euro negative and the recent news flow points to more pronounced Eurozone growth under performance and the Eurozone banking system is not showing any clear evidence of improvement. He finishes by commenting that, “In fact, it seems that the negative feedback loop between weak growth and banking sector fragility remains in place, despite more resilient sovereign bond markets. Moreover, the Dutch statement in relation to bank resolution is not going to be helpful for markets and lending conditions in the near-term.”