EUR USD (1.3025) Yesterday the euro shrugged off the IMF warnings about global growth and the Greek stalemate and continued to trade in firm territory. The market is again talking about what will be the outcome of the FOMC meeting, where a more transparent Fed is likely to reveal its assessment of the economic situation, the expected path for the interest rates and a whole spectrum of views held by its changing membership. The usual discussion about FOMC’s new constituents takes place against the backdrop of the new communication policy where previously anonymous views will now be attributed to every member. Some observers say that the whole interest rate trajectory exercise is geared to provide investors more orientation for their own plans. We see it in the same way. It is an incentive rather than an outright promise; the exercise would not in any way take away from its ability to change opinion and policy course in line with real economic conditions. Some investors expect that the Fed will announce no rate hikes into 2014 compared to the previously stated mid-2013. As regards to QE, the recent CNBC survey shows that half of 75 economists and resource managers polled expect a new wave of easing. These views are, we suspect, are far more dependent on circumstances than on the Fed composition. The euro still has a foothold in stable territory. We target a climb to 1.3285 (with a first stop at 1.3085). The risk-limit to the bullish strategy is unchanged at 1.2850.
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