[Jason_Lim]

EUR-USD has pulled back from the day’s highs, but on the whole, the USD remains under significant pressure as the portfolio re-allocation toward riskier assets, inspired by mounting investor confidence that the global economy is on the verge of a cyclical turn, continues. EUR-USD has closed above its 200-day moving average as well as the downtrend from the all-time high reached in July 2008. The March highs around 1.3740 are now very important as a break would risk a sizeable move higher for EUR-USD to test the late December 2008 peaks above 1.4300. The rally in high betas currencies (EM, commodity lined, GBP) will likely continue, with the tail risk of financial sector implosion having passed, as long as the economic data fail to disappoint.

Separately, the underlying reading of Norwegian CPI came in at +2.7% yoy in April, a tick above the 2.6%expected and the official target of +2.5%. The market generally disregarded the data with the Norges Bank still on course to cut the sight deposit rate another 50bp in June. Indeed, the actions of the ECB and the BoE last week showed that central banks are not taking the green shoots for granted at this stage. In terms of EUR-NOK, the dominant force weighing on the cross has been the risk rally, suggesting additional gains after having broken below trend-line support from the August 2008 lows last week.