EUR USD (1.3445) Given that the German Parliament will vote today to approve the second Greek bailout, it was clear from the outset that Germany would not agree to top up the pan-European rescue vehicles, just yet. The G20 meeting was then a mere reiteration of opinions from all sides: non-eurozone members will increase their IMF contributions only if the eurozone shows more capital for the firewalls. Of course, the general refrain was that the more credible and large the firewall, the less likely it is likely to be used. Meanwhile the LTRO2 is now due and, against the backdrop of looser collateral rules the market estimates around €492 billion to be taken up (Reuters poll). More important than the number, however, is the use to which it is put. Mario Draghi confirmed last month that the ECB’s borrowers and depositors were not the same banks. It is essential that this remains the case. This time around of course several banks and corporate houses are expected to take up the cheap funding. What probably explains the firm euro is that it is slowly remerging as a destination for capital inflows. Data shows that by mid-February central banks were net buyers of euro for the first time since November (Financial Times). Moreover, investment banks are seeing more demand for the euro and euro-denominated bonds. The euro overtook our 1.3395 potential on Friday and should now recover further to 1.3590/95. Supports are at 1.3360 and at 1.3285.
Click here to read the full report: Daily forex 02.27.12
Deutsche Bank