EUR USD (1.3250) A closer look at the latest soft US GDP data reveals that although consumer spending rose 2.9 percent, the fastest pace in five quarters, it was not accompanied by a parallel growth in public spending. In fact, reduction in government spending was because state and local governments shed several thousand jobs, of which one third were educators. This can hardly augur well for the long-term consumer demand. The dollar is therefore understandably trading on a softer vein. On the eurozone front, the news about the last-minute Dutch austerity deal in the Parliament received modest exposure in the media. While the deal will augment Netherland’s chances of retaining a triple A status, it is also being heralded by austerity supporters as crucial for keeping the three percent deficit limit intact for eurozone members. It however, leaves the voters confused about the perceived stance that the various Dutch political parties stand for. And in real terms it hardly mirrors the parable shift which is supposed to be taking place in favour of growth. That said the euro is at least for the time being showing resilience in the face of bad economic news emanating from Spain (high unemployment, bad bank schemes and high yields). On the French election front too, it has, for example not been stressed enough that following the presidential election, the local assembly elections are due in June and they will also likely colour the growth-austerity debate. We entered a dip buying strategy on Friday and continue to look for gains to 1.3350 (price target). A slightly higher risk limit is now at 1.3140.
Click here to read the full report: Daily forex 04.30.12
Deutsche Bank