EUR USD (1.3120) The euro recovered from multi-months lows against the dollar leaving investors searching for a convincing explanation. Of course, at first glance, the better-than-expected April ZEW data, Germany’s monthly survey of investor optimism seemed to be the most obvious reason This explanation, however, looks hardly convincing. Firstly, because the ZEW survey is based on a small sample of 275 financial analysts, not business leaders. More importantly the start of the time interval when the survey was conducted (between April 2 and April 16), actually coincided with the period when the DAX was hovering above 7000 levels and the euro looked ready to overtake the 1.3400 level. Since then, however, the equity markets have turned, the peripheral bond yields have started spiking again and Spanish economic woes have meandered back into market focus. Moreover, as yesterday also saw IMF join France’s President Sarkozy in prodding ECB to lower rates in order to spur growth in the eurozone, there is hardly an investor who is likely to see an upswing in German business confidence as a sustainable factor for keeping the euro firm. Most likely, after the last week’s financial turmoil, the survey participants would not deliver such an upbeat opinion. We reckon the range-bound euro is rather immune to the colour of the current news and is bounced around by few large orders on both sides. As before as long as it trades below our stabilisation point at 1.3235, the risk of a decline to 1.2805 remains.
Click here to read the full report: Daily forex 04.18.12
Deutsche Bank