EUR USD (1.3165) With the BoJ yesterday setting an inflation target (one percent) even lower than the one set by Fed, it seems the markets are being primed for another round of coordinated easing globally. After all inflation levels in eurozone, the US and Japan are contained, so that they will unlikely pose a hurdle for easing. Meanwhile, President Obama’s budget proposal sees a round of spending on education and infrastructure and envisages tax increases for top earners. Campaign-friendly, it is unlikely to be approved by Republicans. Obama has anyway ruled out extending the payroll tax, a move which may dent future consumer spending. And the latest housing numbers tending towards the downside provide another headwind for households. So, with the outlook for fiscal stimulus bleak, it is no wonder that Ben Bernanke refuses to be upbeat about the economy. His colleague, the San Francisco Fed President John Williams even went to the extent of saying yesterday that the FOMC should keep the monetary policy throttle wide open. Yet another rating agency, Moody’s, has delivered an indictment on eurozone countries and for the first time on the UK too. Having already weakened earlier, the euro, however, failed to show any additional signs of an upset as even the timing of the announcement just before another eurozone meeting, reeked of déjà vu. It stopped just ahead of our 1.3130 risk-limit so the target remains at 1.3395.
Click here to read the full report: Daily forex 02.14.12
Deutsche Bank