EUR USD (1.4635) The euro finished trading on Friday near its week’s high, just as it had done the week previous. Indeed, the certainty that market participants attach to near-term Greek funding seems to have been the leading indicator even before that, when the euro often settled on Fridays near the week’s lows. Does this mean that the uncertainty is falling away from the single-currency? Perhaps it is because the uncertainty surrounding the US dollar is growing, or a mixture of both scenarios. Market participants realise the amount of pressure officials are under to ensure that the Greek funding problem is solved, and it would seem that they no longer fear a negative surprise. In contrast, the fundamental data out of the US has virtually been a non-stop disappointment over the past two weeks, culminating with the miserable NFP number on Friday. The financial crowd’s cry for QE3 after the release of the unemployment figure was loud and clear, and the prospect of any US interest rate hike fell even farther off into the future. In comparison, many expect this Thursday’s ECB meeting to include the hint of the next rate hike. Surveys conducted by Bloomberg and the Financial Times Deutschland independently reveal that economists and analysts anticipate another 25bp rise already next month.
Forex traders are apparently receiving buy-signals on the euro, and we see no reason for it to weaken while above 1.4305. The next hurdles stand at 1.4775 and at 1.4830. New support lies at 1.4480.
Market Bias Index
The overvaluation bias in the Swiss franc continues to lead the field. Meanwhile, the euro is now perceived as overvalued versus the US dollar.
Deutsche Bank
Fixed Income Research – Global