Archived IMT (2008.12.02)

EURUSDs rebound pales compared to that of GBPUSD mainly because its Monday retreat was more modest than cables. This was best exposed in yesterdays +3 pence jump in EURGBP to 0.8540. Euros relative stability against USD contrasts with sterlings sharp fluctuations, suggesting a markets perception of policy makers containment of the challenges at hand. The fact that there are higher odds for a smaller easing from the ECB (50 bps) than in the case of the BoE reflects that not only the latter is well behind the curve, but may need to push down rates towards 1.00% next year. EURUSD has accumulated more confidence and stability to carry bids into $1.38 into Q1, while EURGBP stands improving odds reaching parity by Q3 of 2009. EURUSDs interim resistance seen imposed at $1.2820, with support pushing up towards $1.2560 and $1.2620.