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FXstreet.com (Barcelona) - Westpac's Q1 2013 Forex outlook is constructive on EUR/USD to trade towards an initial target of 1.35, "before we would look to sell" notes strategist Richard Franulovich.

Richard sees stronger than expected German Dec CPI as a contributing factor for the ECB to maintain rates unchanged, with the fiscal cliff being averted also playing a positive role on the Euro, he says. "Spanish and Italian yields continue to edge lower and there seem to be few triggers for a substantial rise in sovereign risk premiums early in 2013" Richard adds.

Lastly he also comments on Italian politics, saying "the odds of anti-EMU anti-reform Berlusconi leadership are very low." Greek funding risk, according to Mr. Franulovich, "is off the boil for a few months and doubts about whether Spanish PM Rajoy will ever request a bailout seem moot as markets are content enough that a backstop is in place..."

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