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"We see a further weakening of the euro this fall if Spain and Italy delay asking for EFSF help and are eventually forced by markets to do so" - Athanasios Vamvakidis at Bank of America.

The euro (Currency:EUR) has gradually pulled back against the majors over the course of the day's European trading session.

Gains against the dollar were seen closing in on the +0.5 pct point earlier in the session, we are now witnessing EUR-USD 0.16 pct higher at 1.2351.

The euro pond exchange rate is pretty much unchanged at 0.7865.

Today we hear from Bank of America Merrill Lynch Global Research where the view is that the euro is due for a rather significant fall.

Athanasios Vamvakidis at Bank of America says:


"We see a further weakening of the euro this fall if Spain and Italy delay asking for EFSF help and are eventually forced by markets to do so. We expect the EURUSD to drop to 1.18 in 3Q and to 1.15 by year-end.

"This weakening is also driven by further ECB loosening as the eurozone outlook deteriorates, and persistent problems in the Greek program. We expect Fed policies to affect the euro less than in the recent past, as the euro has now decoupled from the risk-on risk-off trade.

"In this context, recent market complacency about the eurozone may start adjusting early this fall."

The base case forwarded by BofA is that markets have over-estimated the ability and will of the ECB to deal with the Eurozone crisis in its current form.

What will be key to the euro's value as we move towards the end of the year is how the Spanish debt situation plays out. Unless Spain asks for assistance soon we are likely to see the single currency come under significant pressure.

Nevertheless, EUR/USD popped higher again in European trade earlier, supported by in line with expectations Eurozone GDP data (national breakdowns were, at the margin a little more constructive) and a so-so Greek T-bill auction.

"But despite signs that the move up had some potential technical legs on it through the upper 1.23 zone, the EUR move up has faded again in late morning European trading and the outlook as North American trade is picking up is turning a little less constructive.  Further press reports indicating more potential (German) legal obstacles being erected in front of the ESM may be hindering EUR progress.  The SNB probably has a few EUR to get out on any sign of strength as well," says Shaun Osborne at TD Securities.