- The USD index consolidated over the course of last week, while the S&P 500 lost ground. This could be an initial sign that the dollar’s repatriation bid is fading. As this development continues, the dollar will likely weaken towards year-end, especially in the present context of weakening yield support. Market expectations for easing from the Federal Reserve at its next meeting in December have shifted to a 50bp cut versus the 25bp decline seen one week ago.
- EUR/USD should recover as stabilization returns to the financial markets. The ECB’s restrained easing of only 50bp on Thursday has led the market to maintain its view that the trough in interest rates in the Eurozone will be seen at 2.00%, a development that should be supportive for the single currency. Analysts continue to look for the pair to end the year at 1.3800.
- EUR/GBP retested its recent record high after the BoE reduced its key policy rate by 150bp on Thursday, when the market had been expecting a decline of only 75bp. Market continues to look for this level to be broken in the near-term as the pound is rapidly losing yield support.
- USD/JPY continues to be driven by risk aversion as well as interest rate differentials. With global equity markets ending the week on a negative tone and the key two-year US-Japan swap spread implying a move towards 95.00, the risks for the pair appear to be to the downside as the new week gets underway.
Currency Strategy - November 8 2008
November 8th, 2008 · No Comments
Tags: FOREX Strategies
0 responses so far ↓
There are no comments yet...Kick things off by filling out the form below.
You must log in to post a comment.