EUR USD (1.3155) While maintaining rates, ECB President Draghi essentially shifted any policy change to summer when more data on the economy would lead to a clearer assessment. He also firmly shifted the growth issue to the governments, which of course means that among other steps, the politicians have to take lead in ensuring labour market flexibility within the eurozone. By defusing talk about premature exit of the SMP, Draghi bought time perhaps to converge consensus on available easing tools. From the US too, the mixed economic data is leaving policy-makers rather undecided as far as policy response is considered – while jobless claims slid, non-manufacturing ISM did not come up to the market expectations, thus leaving the market more sensitive to Friday’s non-farm payroll data. The latest statements by two of the FOMC voting members, John Williams and Dennis Lockhart, however, cleared some air about the rates staying low up to late 2014. Although they expect inflation to stay low, both members seem to differ in their interpretation of the pace of increase in jobs which meets the Fed’s mandate of maximum sustainable employment. We reckon that most euro investors are waiting to see how the austerity backlash will weigh on the electoral results in France and Greece. Till then the euro seems to be range-bound, downside activity is repeatedly meeting adequate demand. Above 1.2960, we see the euro as broadly stable although positive signs would emerge only beyond 1.3350.
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Deutsche Bank