24 Mar 2014
EUR/USD outlook balanced - RBS
FXStreet (Bali) - Outlook in the EUR is balanced, however, Ukraine may weaken it somewhat, notes Greg Gibbs, FX Strategist at RBS.
Key Quotes
"The EUR continues to trade more like a save haven in the face of a crisis in Ukraine than as an asset at risk. This may to some extent reflect capital flight by Russian investors from assets held in the US. And from assets in Russia and Eastern Europe to assets in the Eurozone."
"Today the Eurozone PMI flash data are released. These data have shown a solid rebound over the last year from deep recession in 2012 to moderate growth. The composite index at 53.3 in Feb offers something of a buffer if it dips without significantly upsetting confidence in Eurozone assets, and it could continue to improve supporting confidence (market expects 53.2 in March)."
"EUR dipped from a high since 2011 last week after the less dovish FOMC, but it remains in an uptrend, roughly in the middle of its range since 2009. Upside should be constrained by recovery in the US, dovish signals from ECB and crisis fears in Ukraine. Its downside should be limited by solid confidence in a periphery recovery and a large current account surplus."
"The chart suggests EUR upside will struggle at 1.40, although it may squeeze just above, and it will find solid support 1.3500."
"My short term bias is to see EUR trade lower with Ukraine fears likely to increase and dovish ECB to play a role in heading off further gains in EUR. Periphery spread narrowing may lose power as a supportive factor as EUR approaches 1.40. However, my colleagues in Europe are seeing a relentless narrowing in periphery spreads and the current account surplus as still the dominant theme. I agree it is ambitious to expect it fall below 1.35."
Key Quotes
"The EUR continues to trade more like a save haven in the face of a crisis in Ukraine than as an asset at risk. This may to some extent reflect capital flight by Russian investors from assets held in the US. And from assets in Russia and Eastern Europe to assets in the Eurozone."
"Today the Eurozone PMI flash data are released. These data have shown a solid rebound over the last year from deep recession in 2012 to moderate growth. The composite index at 53.3 in Feb offers something of a buffer if it dips without significantly upsetting confidence in Eurozone assets, and it could continue to improve supporting confidence (market expects 53.2 in March)."
"EUR dipped from a high since 2011 last week after the less dovish FOMC, but it remains in an uptrend, roughly in the middle of its range since 2009. Upside should be constrained by recovery in the US, dovish signals from ECB and crisis fears in Ukraine. Its downside should be limited by solid confidence in a periphery recovery and a large current account surplus."
"The chart suggests EUR upside will struggle at 1.40, although it may squeeze just above, and it will find solid support 1.3500."
"My short term bias is to see EUR trade lower with Ukraine fears likely to increase and dovish ECB to play a role in heading off further gains in EUR. Periphery spread narrowing may lose power as a supportive factor as EUR approaches 1.40. However, my colleagues in Europe are seeing a relentless narrowing in periphery spreads and the current account surplus as still the dominant theme. I agree it is ambitious to expect it fall below 1.35."