EUR USD (1.3235) News that the ECB’s €40 billion crisis assetpurchase programme has just spent €9 billion for the purpose, comesamid discussions on the ECB’s exit strategy and evokes nervousreaction among some investors. However a close look at the recentstatements emanating from the ECB and the Fed suggests thatneither have expressed any readiness to tighten. At his recentuniversity speech Bernanke stuck to his refrain that policy tighteningshould not follow too early and that the US economic recoverycontinues to be frustratingly slow. In his testimony before the HouseCommittee he even went to the extent of saying that the full resolutionof the eurozone crisis will require a further strengthening of theEuropean banking system. As if on cue, the ECB’s executive boardmember Joerg Asmussen also attempted to dilute the debate aboutinflation fears which elevated German real estate prices, for examplein Munich, have produced. In a statement yesterday, Asmussencategorically said that there are no current speculative excesses inEurope, and should they arise in individual markets nationalauthorities must take care of them. He quietly thus reinstated thatECB’s price stability mandate is for Europe as a whole, not just forcore countries. Arguably, the ECB is also unwilling to tighten too soon.
We will only endorse a bullish outlook for the euro beyond 1.3295,with a potential to 1.3490. The best nearby support is now at 1.3110.
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Deutsche Bank