The European Central Bank may launch a fresh round of stimulus to contain the impact of a possible Greek exit from the euro zone, but the fallout from such a move on the single currency will depend on what route the central bank takes, say experts.
Whether the ECB cuts the benchmark interest rate or offers the region's banking sector cheap loans via another long-term refinancing operation (LTRO) will decide the fate of the euro , Gareth Berry, Forex Strategist at UBS, told CNBC Asia’s “ Squawk Box ” on Wednesday.
The euro could get a boost if the ECB took the "liquidity route" instead of cutting rates, Berry said, as another dose of cheap loans will help shore up the banking sector and improve overall sentiment for the euro zone.However, he didn't expect the ECB to take a decision at its next meeting on June 6 until the outcome of fresh Greek elections called for mid-June are clearer.
In the absence of any direction from the ECB, forex strategists expect the euro to fall in the near-term.
Berry’s three-month target for the euro is $1.25 but "we may get there sooner."Page 1 of 2 | Next Page