EUR USD (1.3210) Japan and China have showed joint interest in expanding the IMF resources to address the eurozone crisis provided the European members work towards lifting the €500 billion cap on the rescue vehicle, the ESM. With the latest economic data showing that housing prices fell over four consecutive months in some of the biggest cities in China, the Chinese willingness to support the IMF is seen by some as part of its strategy to boost eurozone demand for Chinese goods. The surprise move to increase the reserve requirements ratio is also being perceived as a proactive measure to stimulate domestic growth. Meanwhile the market consensus expects the Eurogroup’s meeting on Monday to approve some sort of second Greek rescue package albeit loaded with caveats and conditions. Overall with German Finance Minister’s resorting to more tempered remarks regarding economic stimulus for Greece and one survey in Germany suggesting that the majority of Germans support the idea of helping Greece, at least some of the obstacles to a continued aid have been swept aside. Eurozone officials now need to seek ways to weave in enhanced surveillance as part of Greek bailout and ensure pledges of austerity from Greek politicians. The euro now has the potential to climb to 1.3395 and beyond that to 1.3590. Good near term support is now at 1.3070.
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Deutsche Bank