Societé Generale - "As we head into midyear, the year-to-date change in EUR/USD has shifted back into positive territory. We see this move driven by two forces essentially: short covering, through a broad and deep position cleaning in early June; an upward repricing of forward EUR short-term rates, after Draghi in early June poured cold water on hopes of deposit rate cuts. This makes me think of January, when fears of evaporating liquidity cause a broad repricing of the Euribor strip,…

Deutsche Bank - "US real yields have relentlessly marched higher since May. Some may be surprised by the recent ack of broad dollar strength, but one needs to recall that low real yields since late 2008 were manifesting themselves most in a weak dollar against commodity/$-bloc currencies (notably AUD and NZD) and emerging currencies. Therefore, a change in the real yield trend should most directly translate to dollar strength against those currencies, and indeed that has been the case. With…

Nice...

Francesc

Societé Generale - "The data calendar gets busy again over the coming week, with NFPs the icing on the cake on Friday. Our economists are looking for a s lightly above-consensus number, at +210k. We’ve also got the BoE (waiting for Carney) and ECB (dovish but no cut) meetings on Thursday. Because the Fed is becoming very data-dependant, the focus will be on US employment. Three scenarios:

1.Strong US data would revive exit fears,…

Bank of America Merrill Lynch - "In our view, the ECB has several options to loosen monetary policy further: interest rates, liquidity operations and/or support to credit, but we doubt that it will employ these measures. Rather, we believe the bank will try to reassure the market that all options remain open and could cut the refi further by 25bp in the summer on the back of weaker activity and to preserve low market rates. The ECB could then follow this with more unconventional policy,…

Royal Bank of Scotland - "EUR has been supported by a rapidly improving current account surplus that is now at a Euro-era record. It has been supported by less ECB QE as banks have repaid some LTRO funds. It has been supported by a steady rebound in periphery assets (Spain and Italian 10 year spreads over bunds are around the lows since July 2011, and their outright yields are at lows since July 2010). However, it has been weakened by an ECB rate cut and a preparedness to discuss negative…

UBS - "The dollar remains our favoured currency for 2013. The US economy is likely to expand more than its peers. The Federal Reserve is set to exit uncoventional monetary policy before other major central banks. Dollar diversification by central bank reserve managers and sovereign wealth funds is subdued, and America's shale energy revolution is cutting its current account deficit. Our bullish view on the greenback has become more consensus now. But if the dollar does embark on a multi-year…

UBS - "This week's key points for currencies are:
- several US data releases due but claims still key
- ECB to develop an exchange rate policy?
- G7 doesn't criticise Japan, USDJPY a buy on dips
- BoE Inflation Report key in the week ahead
- Swiss deflation, rising stocks to weaken franc
- buy DNTs as Norges Bank keeps krone rangebound
- expect more RBA easing now, stay bearish AUDNZD"

Bank of Tokyo-Mitsubishi - "The euro continues to remain relatively stable in the near-term with EUR/USD lacking direction. We do not expect that dynamic to change in the week ahead with no clear fresh catalyst on the horizon. The euro appears well supported against the US dollar above the 1.30-level where its 200-day moving average is located. Even ECB President Draghi’s signal that the ECB is open to lowering its deposit rate into negative territory has had only a limited negative impact…

Bank of Tokyo-Mitsubishi - "Given the ECB rate cut, speculation on negative rates, and the strong US employment report, the stability of EUR/USD is impressive. It does suggest that factors like reserve re-cycling may well be playing some role in supporting the euro. But the stability of the periphery debt markets in conjunction with record current account surpluses also mean reduced euro sales in the market. It’s not necessarily due to increased foreign investor demand for periphery debt –…

Bank of Tokyo-Mitsubishi - "we believe that the euro will continue to remain relatively stable in the coming months as upside pressures from the narrowing euro-zone sovereign credit risk premium are offset by loosening ECB monetary policy conditions. However with the positive impact from the narrowing euro-zone sovereign credit risk premium already appearing to be diminishing, we expect that downward pressure upon the euro will begin to weigh more heavily heading into the second half of the…

UBS - " Foreign exchange markets have started May still largely rangebound. But the two major central bank meetings so far this month have begun to shift the balance of risks.

First, the European Central Bank's willingness to consider cutting interest rates below zero is set to act as a cap on the euro. Shorting the single currency has been difficult this year. But upside risks are likely to be limited now by ECB officials discussing negative interest rates whenever the euro rises. In…

Bank of Tokyo-Mitsubishi - "The ECB decision yesterday is very much the focus of the market today ahead of the key non-farm payrolls data from the US later. The 0.25 point cut and measures to be detailed helping to improve the asset-backed securities market in order to improve credit flows to the real economy were the key actions announced but it was the admission that the ECB had an “open mind” to cutting the deposit rate to negative territory that grabbed all the attention. Was this…

 Finally, ECB left with no choice and had to slash its rates by 50 basis point. I had already mentioned in my weekly (Monday) outlook note that price stability is the key responsibility…

Westpac - "Dollar Index survived a test of important support around 81.40/50 as USD’s safe haven status came to the fore. But if the dollar trades the employment report as a growth currency, it could be in some trouble as the risks look to be for another sub-consensus reading. Then we have the post-NFP data lull. We will retain our 83 one month target for now but suspect achieving this will be heavily reliant on EUR weakness.

(...) Eurozone bond markets are pricing in a great deal of…

Rabobank - "Insofar as the market has built up heavy USD long positions there is risk that the USD correction still has a long way to go. That said, clearly a lot of risk lies with the tone of US economic data. To date, it seems likely that the fiscal consolidation measures that have been announced in the US since the start of the year haven’t yet has an opportunity to show up in much of the official economic data. This also suggests that the USD’s pullback will have further to run.

In…

Societé Generale - "Ive spent the morning pondering the ECB and I've run out of coffee so here is as far as I've got! At the last count, 12 of 39 economists surveyed by Bloomberg expect a 25bp cut. Far more expect 'something'. At least one person on twitter has suggested a 50bp move. Market rates have fallen sharply, peripheral spreads have tightened, credit spreads ditto. The market is bulled-up and hoping for something, then! the risk of disappointment is severe, but (always an 'on the…

Rabobank - "We have changed our ECB rates view: we are now forecasting a 25bp rate cut next week. This will take the refi rate to a historical low of 0.5%. Our previous call was for the benchmark refi rate to remain at 0.75% until mid-2014 at least. We do not expect the ECB to take the deposit rate below zero as this may have unintended side-effects and thus will remain in reserve for worse case scenarios, a view we explained in one of our previous research notes (“What are the odds of a…

Bank of Tokyo-Mitsubishi - "The euro is little changed against the US dollar during 2013 providing an anchor of stability. In contrast the other major currencies of the yen and pound have both declined sharply against the US dollar by around 6.0% and 12.0% respectively. EUR/USD has been fluctuating around the 1.3000-level since the start of 2012. The pair briefly attempted and failed to break higher in early February overshooting short-term fundamentals when rising above 1.3500 driven by…

Royal Bank of Scotland - "In the medium-term we still see risks heavily skewed towards a lower repo rate. It look increasingly likely that the ECB could cut rates, perhaps in June alongside updated staff projections, and this could see the Riksbank follow suit in July. We also remain concerned by the scope for renewed financial tensions in the Euro area and are sceptical Swedish data holds up given such weak growth in Europe.

We look for EUR/SEK to trade higher short-term, but then to…

very interesting....

Francesc

Deutsche Bank - "We don't believe the last few days' EUR/USD squeeze has legs and remain bearish for three reasons.

First , we think the market is under-estimating the dovishness behind last week's ECB press conference. Had it not been for the more than +10% decline in euro Brent prices in recent weeks combined with exceptionally weak domestic price pressures, Draghi's increasing discomfort with the inflation outlook would be of lesser…