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Forex Flash: German prepares for EU “horse trading” summit - BTMU

Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that Germany pushed forward a vote on its budget which will result in Germany reaching a balanced budget one year earlier than required.

He feels that the vote was pushed forward ahead of the EU summit and will be the ammunition used by Germany to urge other countries to stick to austerity. He writes, “France and Spain of course are arguing for some easing of targets and although we may get some shift agreed, the German budget would suggest that any shift on fiscal targets will be pretty modest at best. The euro below 1.3000 should find supportive bids for now.”

Forex Flash: Aussie leads the way - BTMU

Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that during another relatively quiet trading session in Asia, it is the Australian dollar that is in the spotlight, advancing by 0.7% against the dollar after much stronger than expected employment data.
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Forex Flash: Norges Bank with less urgency to raise rates – TD Securities

Despite the unchanged policy, rates on hold at 1.50%, the Norges Bank statement explaining the details behind the decision had a much more dovish interpretation than what TD Securities analysts had been expecting. “The Norges Bank seems to have made some significant changes to its inflation models, and slashed its projections from 2014 onwards, with CPI now sitting at only 2.1% at the end of 2016, still below the Norges Bank’s 2.5% target”, wrote analyst Cristian Maggio. “And along the same lines, the Norges Bank also slashed its policy rate projections, actually incorporating some risk of a rate cut in mid-2013, and the first rate hike was pushed back by about a year to H1 2014”, he added, suspecting that this move in the policy rate forecasts was as much about lower inflation as it was about the fact that the Norges Bank gets new macroprudential tools this year, “so there is less urgency to raise rates as the Norges Bank now has better ways to deal with the credit cycle”.
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