EUR USD (1.2530) Ahead of the ECB meeting and likely BoE announcement on easing, investors are still debating the outcomes of the EU summit. Some commentators have even come to the conclusion that the consensus among the summit participants is more apparent than real and the probability of a eurozone break-up has increased. We disagree. Of course, Chancellor Merkel has categorically rejected debt mutualisation, but the fact that a banking union has been discussed and direct recapitalisation of the Spanish banks is firmly on the agenda does reflect a marked change in policymaking. In any case, ceding sovereignty to supra-national bodies will always be a prickly issue. The latest Forsa poll conducted among Germans, for example, reveals that a majority is opposed to ceding budgetary sovereignty to EU and a three-quarters reject eurobonds and US-style federal states of Europe. Even the idea of a directly elected EU president is rejected by 63 percent of Germans. More than half of them, however, agree that the euro has been advantageous for Germany and two-thirds prioritise a resolution of the crisis. This stance is reminiscent of the Greek election dilemma where a majority of voters rejected EU-imposed austerity, but membership of the eurozone was still deemed as advantageous. As long as the euro manages to hold above 1.2510, it maintains the momentum to immediately challenge 1.2745 and beyond that even 1.2840, the key level for further acceleration. The former lower border of the consolidation zone is at 1.2435.
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Deutsche Bank