EUR USD (1.3225) French presidential candidate Hollande’s suggestions for boosting growth include the issue of infrastructurerelated eurobonds, the mobilisation of existing structural funds and a financial transaction tax. While these measures might imply long-term growth (potential), they will hardly dent the austerity reforms currently being implemented. The German Chancellor supports the idea of sustainable initiatives, but stops short at stimulus programmes. And ECB President Draghi endorses a ‘growth compact’, although he warned that governments should persevere in restoring fiscal health. This increasingly conciliatory tone among the eurozone leaders gives an impression that negotiations might reach the point where debt and deficits limits are reviewed. The earlier ardent austerity supporters might consider extending timelines or creating new benchmarks that, for example, link deficits to the pace of growth. However, so far, the tone does not suggest any extra money flowing to consumers in the short-term. In the US, the Fed appeared to be similarly reluctant to dole out any additional stimulus, although the reasons are somewhat different. However, Bernanke was at pains to reassure the market that the QE backstop remains in place in case of an economic setback. The euro reacted to the FOMC meeting but stuck to the recent narrow range. Our 1.3235 stability point was reached, but not overtaken. If a break happens today (the point is weaker now), the first resistance will be at 1.3350, also a trigger for more upside activity.
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Deutsche Bank