Norges Bank Up Next
Risk appetite remained relatively well supported overnight in the wake of Tuesday’s rally in US stocks (which ultimately saw the S&P500 climb 1.2%). Political manoeuvring continues around the US fiscal cliff, but the distance between both camps appears to have narrowed significantly. Further signs of compromise are likely to emerge over the coming days and so, with the risk-on mood looking set to continue, we would expect further short-term dollar weakness – except against the yen. Note though that this wave of dollar selling is likely to be a temporary affair. US yields have started to drift quietly higher, and the 10y yield in particular is approaching key technical levels. Eventually, rising yields are likely to trigger a rates-driven dollar rally, and that expectation is the cornerstone of our bullish dollar call for 2013. Overnight EURUSD traded 1.3217-1.3256 and USDJPY 84.10-84.30.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank