EUR USD (1.3150) Since weeks the euro is wedged in a narrow range closer to the year-high than the year-low. This trend did not alter yesterday even though the political risk in the eurozone leapt back into the market focus. The collapse of the Dutch government following disagreements about implementing austerity, electoral uncertainty in France, and indications that German socialists are likely to revisit the European fiscal pact, all made the headlines. But even the poor eurozone PMI data failed to provide any durably negative nudge for the euro. Yesterday saw several ECB members basically justifying the Bank’s wait-and-see attitude against the market clamour for more proaction. Commentators also dwelled on the increasingly hawkish colour of the FOMC, as indications emerge of tightening earlier than late-2013. There seemed to be enough reasons for the euro to fall, but the market does not have enough sellers to make this happen. Possibly, like Krugman, those who are anxious about the euro reached this conclusion two years ago. The latest developments are merely a confirmation of their earlier insights, not an incitement to sell even more. The euro continues to move just below our 1.3235 stabilisation point. A break would diminish the risk of a decline to 1.2960.
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Deutsche Bank