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Fundamental Afternoon Wrap: UK releases budget as Cyprus updates wane

FXstreet.com (Barcelona) - After a frantic first half of the week which has seen a glut of commentary covering the Cyprus, an element of news fatigue has crept through the institutional research community. Cyprus naturally takes poll position due to the liquidity of developments but also, UK Chancellor Osborne´s budget has caught attention today.

EUR

Brown Brothers Harriman analysts believe that the when the Cyprus post mortem takes place, the exclusion of Russia from the discussion will likely be remembered as a pivotal mistake. Further, they feel that the ECB has forced Cyprus into a difficult position where they have to chose between a loss of sovereignty to Europe or Russia either way. Meanwhile Westpac analysts note that the Cyprus crisis deepened as its parliament rejected the proposed bank deposit levy plan demanded by EU and IMF lenders and its finance minister offered his resignation (the president rejected it). For now, they note that the markets are viewing Cyprus as Europe´s problem and they are remaining short EUR/USD.

GBP

ING economist James Knightley notes that the UK Budget offers too little to growth, despite efforts to “jazz it up” with a few gimmicks. He writes, “The budget is fiscally neutral, and has had to deal with Office for Budget Responsibility (OBR) forecasts that show both growth and progress on the budget deficit and debt reduction will be slower and take longer than before.” Overall, he feels that with a bad hand, the Chancellor has not played badly, however it is difficult to see this budget transforming the growth prospects for the UK. Furthermore, he adds that with more QE still looking likely and uncertainty over the Scottish referendum, as well as the possibility of an EU exit referendum, we continue to see downside for sterling. He targets GBPUSD at 1.40 by year-end. Meanwhile, TD Securities note that while GBP/USD has not beaten last week’s high the charts are starting to look more constructive.

Forex: USD/CHF trading negatively at 0.9434/39 after EMU confidence

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Forex: EUR/USD ignores EMU confidence, all eyes on US FOMC

The EUR/USD is still quoting close to its daily highs but still capped by resistance around 1.2970 after the release of the flash EMU consumer confidence in March. Data in the Eurozone improved only from -23.6 to -23.5, disappointing expectations of a rise to -23.3. The main focus of the day is the FOMC meeting at 18:00 GMT.
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