The euro dollar exchange rate is 0.932% higher on the day with 1 EUR = 1.4519 USD. This morning the foreign exchange strategy team at RBS recommended clients sell the euro dollar exchange rate (EURUSD). The foreign exchange strategy note says: "The debt ceiling impasse in the US has been unhelpful for this trade. We expect at least a temporary raising of the ceiling to be announced over the next week. However, the longer term impact on confidence and continued soft economic data are increasing headwinds for the USD. Euro-area PMI surveys and the German IFO survey continue to point towards a Euro-area slowdown." Cyclical factors are supportive of USD gains vs. a number of G10 currencies but the DXY is trading at 6% below the RBS "fair value" estimate, likely reflecting the uncertainty over both the near-term debt ceiling debate and the potential for a US rating downgrade over the medium-term. The RBS currency strategy forms part of a longer term view on the euro dollar exchange rate. In their morning currency note analysts at UBS have backed the EUR USD rate to head higher: "While support lies at 1.4324, a break above 1.4578 would signal extension of gains towards 1.4697."

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