Focus FX

11 Ianuarie 2012

RAIFFEISEN BANK S.A.

 

EUR/USD

EUR/USD: 1.275 - 1.30 (March)

Last week saw a continuation of the string of positive surprises in the US economic data, with the ISM manufacturing index rising to 53.9 and the labour market report showing job growth of +200K. By contrast, the economy in the Eurozone is following the downward path marked by the leading indicators. For example, German industrial orders contracted at a rate of -4.8% mom in November (-4.3% yoy, the sharpest monthly decline in three years), while Eurozone retail sales fell 0.8% mom in the month.

The striking divergence between the (currently prevailing) robust growth in the USA and the recession in Europe is also visible in the development of EUR/USD: on Monday morning in Asian trading, the pair fell to 1.2666, the lowest level since September 2010, but then bounced back to well over 1.27 during trading later in the day.

As the economic contrast between Europe and the USA should remain sharp for the time being and the Eurozone debt crisis will feature plenty of pitfalls in the months to come, we continue to expect that EUR/USD will stumble to even lower level over the short term. Over a one-year horizon, however, we would tend to see declines of this nature as buying opportunities for the euro, as we believe there will be substantial progress in solving the debt crisis as the year proceeds.

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