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8 Mar 2013
Forex Flash: EUR/USD looks bullish ahead - BTMU
Bank of Tokyo Mitsubishi UFJ analysts note that the Euro has declined steadily against the dollar from the intraday high of 1.3711 set of February 1st.
They suspect that after yesterday´s ECB press conference that the EUR/USD rate may be set for a moderate bounce back toward the 1.3200-1.3300 level. They write, “There had building expectations of a rate cut but although a rate cut was discussed today, the ECB’s decision to leave their monetary stance unchanged will help support the euro above 1.3000. However, the upside for the euro should be capped by the fact that a rate cut was discussed.”
Further, they note that the inflation projection for 2014 was lowered from 1.4% to 1.3% while the real GDP projection was lowered from 1.2% to 1.0%. These declines confirms to us that there remains a notable risk of a rate cut over the coming months. They continue to assume June as the most likely month, to coincide with the next update of forecasts. Looking ahead they feel that next week, EUR/USD will also take a lead from broader dollar reaction to the employment report. They finish by writing, “Assuming the data is consistent with other positive labour market data, the payrolls report would be another factor arguing against a major bounce higher for EUR/USD next week.”
They suspect that after yesterday´s ECB press conference that the EUR/USD rate may be set for a moderate bounce back toward the 1.3200-1.3300 level. They write, “There had building expectations of a rate cut but although a rate cut was discussed today, the ECB’s decision to leave their monetary stance unchanged will help support the euro above 1.3000. However, the upside for the euro should be capped by the fact that a rate cut was discussed.”
Further, they note that the inflation projection for 2014 was lowered from 1.4% to 1.3% while the real GDP projection was lowered from 1.2% to 1.0%. These declines confirms to us that there remains a notable risk of a rate cut over the coming months. They continue to assume June as the most likely month, to coincide with the next update of forecasts. Looking ahead they feel that next week, EUR/USD will also take a lead from broader dollar reaction to the employment report. They finish by writing, “Assuming the data is consistent with other positive labour market data, the payrolls report would be another factor arguing against a major bounce higher for EUR/USD next week.”