The Waiting Game
Investors remain in wait-and-see mode ahead of the eventual reopening of banks in Cyprus on Thursday. Meanwhile a familiar theme continues to play out quietly behind the scenes – US economic outperformance is gradually nudging the dollar incrementally higher. US equities continue to benefit from the better tone of US dataflow and the S&P500 narrowly avoided closing at a record high on Tuesday. Our European economists reinforced our stronger dollar view overnight by lowering their Eurozone growth forecast for 2013 to -0.4% (from +0.1%) previously. Our US economists meanwhile continue to look for 2.3% US growth over the same timescale. So whatever one’s view on the outlook for the Eurozone sovereign debt crisis, it seems the trans-Atlantic growth gradient is reason enough to p o sition for long term EURUSD downside.
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UBS