EUR USD (1.3225) It is hard to ignore the positive tone of the recent US data – the headline ISM data was strongest in 10 months, the Fed Senior Loan Officer Survey revealed that US banks saw increased demand for lending in Q1 (although eurozone branches of these banks did not show the trend) and even Nielsen reported that the US consumer confidence surged in Q1 to its highest in over four years. This positive data highlights confirm what the underlying US GDP data had indicated earlier, namely, a robust private spending component. This picture is in definite contrast with the eurozone where economic activity is modest. News reports tend to highlight the negative, namely the pan-European austerity backlash, electoral uncertainties, and headlines about Spain (recession, high unemployment of around 24 percent, and private debt to GDP ratios bordering on 230 percent). The only news that has been generally perceived as remotely positive is the shift in political emphasis towards growth, but this now seems to centre on new funding for the European Investment Bank. It is doubtful however, whether infrastructure projects will provide any immediate growth impulse to the European economy. And market participants note greater German government praise for the new Spanish budget which contains €27bn in new taxes and spending cuts, than for growth-oriented policies. Yet, the euro continues to display the same resilience that it has exhibited throughout Q1. In fact it remains well placed to reach our price target at 1.3350. The slightly higher risk-limit is now set at 1.3150.
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Deutsche Bank