EUR USD (1.3335) A lull period has set in with multiple signs of easing in the eurozone. The finance ministers’ meeting that took place last week has been hailed as a success by the IMF and by the ECB. Christine Lagarde welcomed the agreement on roughly €800 billion, just over $1 trillion, and stated large firewalls are critical for ending the crisis and creating stability. The FT reports today that a few large banks that took advantage of the LTRO funding are preparing to repay the ECB money. The money can be repaid already 12 months after the initial loan. This suggests that banks are able to raise longer-term financing elsewhere, another sign for a return to normality. In a further indication of confidence, US money managers spurred inflows of $246bn in February to money market funds mainly in France, Germany and Belgium. This short term movement is seen as an improvement by managers who were under allocated in Europe in 2011 and seek returns in what is viewed as an increasingly stable market. So, on the face of it, many pieces of information seem to be contributing to the perception of greater stability in Europe. These are complemented by confident opinions of ever-building strength in the US. For the EUR/USD, this might mean that it does not go anywhere but for the near-term we continue to anticipate strength to a price target at 1.3410. The risk-limit on our current bullish strategy should, however, be tightened to 1.3250.
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Deutsche Bank