Tuesday February 24, 2009 - 23:07:57 GMT
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FX Blog- GVI Forex Month Ahead Forex Forecasts
Forex Forecast of Major Currency Pairs
The Global-View.com Month Ahead Currency Outlook is prepared weekly by the trading professionals at GVI Forex. For information on the GVI Forex Service Click Here
February 25, 2009
Bank bailout plan starting to take shape and might be providing psychological support.
USD and gold closely linked to stocks (risk aversion play).
Fed has been very aggressive in attacking U.S. problems.
U.S. economy weak. Expect long lead time between stimulus and its impact.
Japan hit hard by sluggish export demand. Economy falling off a cliff?
Fear of return to Japanese deflationary price pattern of past two decades.
Bank of Japan ZIRP (Zero Interest Rate Program) with overnight rate target +0.10%.
Nikkei correlated to USD/JPY.
Fiscal year end repatriation (March 31) should favor JPY. However, talk of pan-Asian agreement to weaken JPY.
Click on chart for two year history
ECB policy behind the curve. Dissention within policy board over recent policy stance. ECB has lost its stellar reputation.
Growing concern about East Europe a new ´┐Ż/$ weight.
Lack of a common E-Z fiscal policy lever a problem. E-Z bonds in the wings?
March 50bp rate cut to 1.50% widely expected.
Economic weakness in Spain, Ireland and Italy a worry with no currency devaluation option.
EUR vulnerable until deleveraging ends.
Click on chart for two year history
U.K. economy in a bad state. As in the U.S., financial sector hard hit.
Bank of England aggressively easing. Close to a Quantitative Easing (QE) policy.
GBP fundamentally vulnerable vs. the EUR. CHF-
Swiss economy slowing. Inflation well below target.
Swiss National Bank for all practical purposes has cut rates to zero.
SNB has threatened intervention (selling CHF) vs. the EUR.
CHF should trade weaker vs. the EUR.
Commodity Currencies CAD-
Misnomer to call CAD a commodity currency, but heavily influenced by energy.
Canadian manufacturing and energy economy tied to the U.S.
Bank of Canada policy easy. Inflation within BOC target range.
CAD trading mostly inversely with USD. Range trading
Australia and New Zealand dependent on commodity demand. Demand is down, so both suffer.
Both banks have already eased aggressively; additional stimulus in the pipeline.
Key inflation measures contained.
More than CAD, expect AUD and NZD to trade inversely with the USD.
John M. Bland is co-founder and a partner of Global-View.com. Prior to Global-View, he was a Vice-President and senior dealer in a forex inter-bank and futures trading arm of ContiCurrency, a subsidiary of the Continental Grain Company in NYC. Prior to that, he was an early member of the Chemical Bank corporate advisory service in NYC, and also worked in international liability management for that bank. John holds an MBA from the Hass School at the University of California at Berkeley and a bachelor´┐Żs degree in International Economics from Berkeley.
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