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Forex Flash: EUR could find support after ECB meeting – Danske Bank

The single currency is waiting for the ECB statement glued to the area around 1.3560/70 on Thursday, against a backdrop of prevailing risk-on mode. Market expectations for a change in the repo rate are practically zero, although the FX community expects some fireworks from Draghi’s press conference.

Chief Analyst A.Lohman-Rasmussen at Danske Bank, believes that if President Draghi somehow talks down the recent uptick in EONIA rates, that could plot against any attempt by the single currency to gather further traction. The expert added that If this case materializes, the pullback would be temporary.

“In our view the market is far too optimistic that Draghi will try to talk down the euro today and we actually believe that EUR/USD will at end of the day be higher. Remember, that the macro economic picture is better than a month ago when Draghi sounded relatively upbeat. Today, he might even add that the repayment of the LTRO money is a sign of health, which should steepen the money market curve further adding further support to the euro”, he concludes.

Forex Flash: ECB Draghi's refusal to play Hollande's game to strengthen EUR/USD - Commerzbank

Recent euro strength has turned into a debate, initiated mainly by France, and is likely to become the centre of attention at today's ECB press conference. Commerzbank analysts don't see any excpectional move (15 cent in approx. 6 months), but Draghi should be forced to speak about the issue. “At today’s press conference ECB president Mario Draghi will probably only refer to the on-going improvement of the situation in the euro zone with reference to the debate surrounding the alleged euro strength”, wrote analyst Lutz Karpowitz, pointing also to the falling target balances interest rates on borrowings for companies in the different countries that have increasingly converged recently.
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Forex Flash: AUD in the doldrums after rough week – Westpac

The AUD has had a rough week – retail sales posted back to back declines in Nov and December, against expectations for at least a statistical bounce. Moreover, the AUD also emerged weaker after the January labor force data today, as the 10K jobs gain hid a -10K fall in full time employment while the steady 5.4% unemployment rate was aided by the participation rate falling to 65.0%, a new low since November 2006. Finally, “Tuesday’s RBA statement did the AUD no favors either as the steady hand at 3.0% was as we and most forecasters expected, with market pricing also above 80%.” writes Sean Callow, a Global FX Strategist at Westpac.
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