EUR/USD (1.3720) The euro traded lower early in yesterday’s European session as news began to circulate that the IMF had suggested the ECB should lower rates if risks to growth persist. The Fund approved of President Obama’s plan to stimulate job creation, but it also shaved a full percentage point from its Q3 GDP forecast for the US, which apparently prompted traders to give back their dollars. The Fed began its two-day meeting on Tuesday. A majority of observers is expecting the Bank to ‘twist’ its portfolio out of short-dated maturities and into the long end of the yield curve. Although most do not think the operation will do any good, they still reckon the Fed should go ahead. For example, in a Bloomberg poll of 42 economists, over 60 percent think it will fail to create jobs, and 15 percent that it could even be harmful. The reason for the popular endorsement, therefore, probably has to do with the very human preference for action over inaction when there is a problem. In short, investors might think the Fed would not be doing its job if it didn’t do something.
Yesterday’s oscillations changed little for the euro’s near-term outlook as there are hardly any nearby points that are meaningful to traders. To the upside, the first is at 1.3790. This would have to be broken to give any sign of re-emergent buying interest. The points are even sparser to the downside, where we expect no good demand ahead of 1.3360 and 1.3210.
Market Bias Index
Market discussion about a possible change in the SNB’s intervention threshold for the EUR/CHF has pressuredthe franc back into its position as the currency with the greatest perceived undervaluation.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/09/GDPBD00000193464.pdf
Deutsche Bank
Fixed Income Research – Global