Exchange Rates

1.30 has become the key level for EUR-USD, with investors more confident that the US economy will recover faster than the eurozone signalling a return to fundamental valuations on the currency markets. The risk-off / risk-on trading that markets had become so familiar with appears to have diminished alongside the strengthening of the US economy.

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UniCredit say 1.2940 and 1.2855 levels are the next targets once 1.30 has capitulated.

Elsewhere, the yen’s retreat should turn into consolidation soon.

"Yet, investors should still go JPY short against those units that have not yet exploited the current retreat of the Japanese currency, like the AUD and the NZD," say UniCredit.

The Swiss franc suffered from speculation that the SNB could increase the EUR-CHF floor at 1.20 at its meeting this morning.

Disappointment here may thus spark some CHF buying, but UniCredit analysts say they would use any USD-CHF or EUR-CHF slide below 0.93 and 1.21, respectively, to return long.

The pound dollar exchange rate should still struggle between 1.56 and 1.57, but the weaker EUR-USD represents a renewed drag for EUR-GBP: the key break below 0.8311 could now trigger more sales towards 0.8260 at least.

And finally, the big mover on the foreign exchange scene yesterday was the Norwegian Krone.

"The Norges Bank’s deposit rate cut to 1.50% has clearly caught markets on the wrong foot, but current EUR-NOK levels close to 7.60 seem a bit excessive and should offer a new opportunity to return short," say UniCredit.