ING: The EUR

EUR/USD has climbed back to the 1.120 handle, entirely due to a softer dollar. The euro is not really recovering momentum in other crosses, a sign that French risk continues to weigh. The France-Germany lOyr yield spread tightened around 5bp yesterday to 137bp, seemingly driven by relief in the global bond market rather than idiosyncratic factors. We have a one-month target of 1.13 in EUR/USD, but we could still re-test the 1.1150-1.1160 area in the coming days. As discussed in the USD section above, we see upside risks for USD today as US CPI is released.