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Why We Remain Bullish on EUR and JPY? - Morgan Stanley
Markets are now questioning the effectiveness of monetary easing (rate cuts or QE) to be able to weaken currencies. In particular, JPY and EUR cometo mind where both the BoJ and ECB eased further in January and March yet saw their currencies strengthen afterwards. Our analysis on whether monetary easing can weaken currencies going forward is now based on the ability to bring down long-term bond yields.Previously currencies were able to weaken for two major reasons outside of yield reductions, but these reasons are now reaching limits. First, there was a rise in inflation expectations from the belief that ... (full story)
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