EURUSD

EUR  Late on Friday, ECB Executive Council member Juergen Stark announced his resignation. Press reports suggest that disputes over the ECB's decision to recommence bond purchases drove his decision. Germany Deputy Finance Minister Asmussen has been proposed as his successor. Stark announced he would continue to serve until a replacement is announced. The development is regarded as EUR-negative as the composition of the ECB is turning more dovish with the departures of Trichet, Weber and Stark, though if the ECB does become more accommodating towards easing in various forms, it could contribute significantly to improvement in financial stability. Fears that the Greek debt rollover/swap would not hit the 90% target caused the EUR to sell off as well, on the back of fears that Greece would announce a default as a result. So far these fears have proven unfounded. On Saturday Greek PM Papandreou announced that Greece would stay the course, and Finance Minister Venizilos announced a new property tax would be implemented to maintain revenue targets. EU Economic and Monetary Affairs Commissioner Rehn said that he welcomed the Greek commitment and noted that EU staff would likely return to Greece in the coming days, allowing the Q3 Troika report to be completed by month-end. Bloomberg reported that French banks could face a downgrade as early as this week. This would force funding costs to rise again within the Eurozone financial system and pressure risk in general. We remain cautious on the EUR at current levels. The G7 Finance Ministers meeting did not agree on immediate coordinated stimulus. On Financial Stability, the noted that "monetary policies will maintain price stability and continue to support economic recovery. Central Banks stand ready to provide liquidity to banks as required. We will take all necessary actions to ensure the resilience of banking systems and financial markets. In this context we reaffirm our commitment to implement fully Basel III." EU Commissioner Joaquin Almunia noted overnight that new rescues within the Eurozone could not be ruled out, though he said that he did not envisage a recession in the Eurozone. 

Targets: EURUSD 1m 1.40, 3m 1.35