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Forex Flash: EUR/USD looks neutral ahead - BTMU

FXstreet.com (Barcelona) - Bank of Tokyo Mitsubishi UFJ analysts have taken a look at EUR/USD and are neutral in outlook and believe that spot will range between 1.2850-1.3250.

They begin by commenting that the Euro continues to remain relatively stable against the US dollar, fluctuating around the 1.30-level in the near-term. They add that the euro is deriving support from the ongoing narrowing in the euro-zone’s sovereign credit risk premium with 10-year Italian and Spanish government bond yields declining to their lowest levels since October 2010. Further, they add that Italian President Napolitano has nominated Enrico Letta to be the new Prime Minister and an agreement is now expected to be reached by next week to form a grand coalition government. In contrast, recessionary conditions in the euro-zone are increasing expectations of further ECB monetary easing weighing upon the euro. They write, “We expect the ECB to lower its refi rate by 0.25 point at next week’s policy meeting. The ECB has also indicated that it is assessing ways to ease credit conditions for SMEs in fiscally challenged countries. Weakening economic growth momentum in the US is also weighing upon the US dollar. Real GDP growth is expected to be confirmed at a robust 3.0% pace in Q1 although appears set to fall back towards 2.0% in Q2.”

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