Shilling believes that the ECB is getting ready to depress the euro:
The ECB reduced its overnight reference interest rate from 0.5 percent to 0.25 percent in November. If it cut the rate again, the ECB would join the Federal Reserve and the Bank of Japan with rates of essentially zero. With all the central-bank-created liquidity sloshing around the world, these rates are largely symbolic. Yet another ECB reduction could make foreign investment in the euro area less attractive, to the detriment of the euro.
Currently, ECB member banks are paid nothing on their deposits. A negative rate -- charging banks to leave their money at the central bank -- would encourage them to lend and invest elsewhere. That would push down returns in the euro area and discourage foreign investors, also to the detriment of the euro.
Looming deflation across Europe is putting pressure on the ECB to act:
Purchases of long-term securities would tend to depress their yields and make them less attractive to foreign buyers, again achieving the ECB's objective of depressing the euro. A weakening euro would chase away foreign investors, leading to further declines. Lower long-term interest rates would also encourage borrowing and economic activity in the euro area. The ECB has yet to try QE overtly, yet it has done so in the past, indirectly. In late 2010 and early 2011, it lent 1 trillion euros to its 800 member banks with repayment terms up to an unprecedented three years. Those banks in turn largely used the money to buy their own sovereign issues. Spanish banks bought Spanish government bonds, Italian banks purchased Italian government bonds, and so on. During those dark days, there were few other buyers.
Draghi gets a lot of credit for his July 2012 "whatever it takes" statement, but it was foreshadowed by the earlier lending program. In the last year-and-a-half, most of those ECB loans have been repaid. The ECB could probably reactivate this form of QE by "encouraging" its member banks to renew their borrowing. In any event, it will take much more than words to reduce the euro's value significantly and head off deflation.
You can read the entire April 24 Bloomberg article here: http://www.bloombergview.com/articles/2014-04-24/might-be-time-to-short-the-euro