EUR USD (1.3270) The currency markets appear to be struggling to interpret the risks for the euro and for the dollar. On one hand, high oil prices, rising US long yields, and the prospects of tighter Fed policy earlier than 2014, are considered the most apparent short-term challenges for the dollar; on the other, investors are anxious that any peripheral shocks in the eurozone might push the euro out of its current upward trajectory. Besides these rather ostensible hurdles, FX traders also have to deal with the factor ‘China’. Weakening Chinese growth, slowing demand for commodities like iron ore, hikes in energy prices and increases in salaries have delivered an economic mix that is difficult to evaluate for its relative impact on eurozone and the dollar-zone. And now, quietly in the background, renewed discussions about the exit strategies of the Fed and the ECB can also be heard. Clearly, traders are far from having made up their minds on the future for the EUR/USD rate.
Click here to read the full report: Daily forex 03.21.12
Deutsche Bank