The euro fell against the US dollar this morning, as investors realised that there were no quick fixes to Europe's structural issues.

'Markets realised quickly that this crisis won't be cured by adding liquidity, no matter how big it is,' said Toshihiko Sakai from Mitsubishi UFJ Trust and Banking Corp. An announcement from Moody's Investors Service yesterday did not ease investor concern either, with the rating agency warning that Greece's debt rating will most likely be reduced further to the BAA range, which is one class above speculative grade, when it concludes its review in four weeks. It seems that Angela Merkel's words last week of sending 'a very clear signal against those who want to speculate against the euro,' have backfired, with most analysts now forecasting the euro to drop further. 'The euro will definitely hit what we call its long-term fair value at $1.20 and it may easily overshoot that if difficulties in Europe persist,' said Mansoor Mohi-uddin from UBS. 'The policy mix in Europe is becoming very unfavorable to the currency. Medium-term we'd like to sell the euro against the dollar and against sterling as well, primarily because it looks like the BoE and Fed have finished QE, while the ECB is now embarking on a form of quantitative easing.