Fade the EUR headline risk
EURUSD is trading around 1.3100 ahead of today’s meeting of euro area finance ministers that is expected to finalize the deal for Cyprus. Portugal and Ireland will also be on the agenda with a possible extension of repayment terms in both cases. The headline risk for the EUR persists it has been largely overshadowed by the implications of the BoJ policy move last week as Italian and Spanish 10y bond yields remain well below pre-BoJ levels. On the data front, we are in line with consensus expecting a 0.2% m/m gain in the Eurozone February industrial output, which should have limited market impact. We favour buying EURUSD on any dips to 1.3000 as the pair remains somewhat undervalued relative to measures of the euro risk premia. Our revised USDJPY forecasts also imply significant strength in EURJPY over the remainder of the year, with a target of 140.00 for Q4.
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BNP Paribas