EUR/USD: Modest upside – ANZ

On a nominal effective trade weighted basis, the euro is now fairly valued, as reflationary biases have emerged, according to analysts at ANZ.

Key Quotes

 “In response to the improved growth climate and reduced deflationary risks, the euro has repriced; and the effective nominal exchange rate is now in line with its average since the euro started trading in 1999 (99.5). On that measure, it is reasonable to argue that the euro is now fairly valued.”

“The ECB will proceed cautiously as it evolves policy guidance. The focus on tapering will intensify near term.”

“The monetary policy backdrop in the US is benign whilst the debt ceiling limitations raise the focus on fiscal uncertainty.”