"Following the 2008 credit crisis, the US economy hovered on the edge of the abyss. The Federal Reserve's response was to lower its benchmark interest rate to near zero. In addition, it opened the monetary floodgates. This resulted in dollar weakness. Various other economies around the world were also in bad condition and they, too, slashed interest rates as central banks stepped in with massive liquidity injections. Also because these economies were struggling and could not cope if their currencies appreciated greatly against the US dollar. The outcome was that interest rates dropped in many places whereas, on balance, exchange rates did not fluctuate too much." write ecr research.

They continue, "However, we are about to see a sea change in policy. After the credit crisis erupted, the US applied maximum fiscal and monetary stimulus. As its economy and job market are the most flexible, the US economy leads the way upwards. Chinese growth is in decline, Japan is still plagued by deflation, and Europe is edging away from recession......."

And they conclude, "In the circumstances, we do think the pullbacks in EUR/USD and GBP/USD will accelerate in the near future. This is particularly the case for EUR/USD as the euro can depreciate on growing Eurozone tensions."

Read more in the full article here.