Rabobank - "EUR/USD broke through barriers at 1.35 this morning and in doing so the pair hit our long held target of 1.35 meaning that we will have to reconsider our longer term objectives. While our view that central bank accommodation coupled with expectations that the EMU crisis is moving closer towards a resolution will hold up risk appetite has essentially been vindicated, the move to 1.35 has been more rapid than we expected. As a consequence we have been left feeling slightly uncomfortable even though our forecast has been hit.
The main source of our discomfort stems from the view that investors’ desire to move into riskier assets is counter to the bias of forecasts such as the IMF, World Bank and OECD towards revising lower estimates for world growth this year. While we have been arguing that the outlook for the coherence of EMU started to improve last July when politicians underpinned the need for fiscal union, there is still the potential for hiccups along the way. As a consequence while we remain of the view that central banks will continue to support risk appetite this year and EUR/USD will retain an upwards bias we would also warn that there is potential for pullbacks and investors should remain on their toes."