Forex Forecast – Voltrex Fx
Sterling recovers against the dollar and euro but remains under pressure
British surveys shows business confidence is falling again
Equities continue to rally pushing higher yielding currencies up
Dollar remains weak as risk confidence remains in global markets
Gold sees another record high at $1,127/troy ounce on weak dollar
Forex Forecast – US Dollar: The dollar is continuing to be under pressure from its higher yielding counterparts as risk sentiment remains strong in global markets. Equity markets remain bullish which has led to investors selling the dollar and buying higher yielding currencies, namely the Aussie dollar, euro and sterling. This has lead to over a cent and a half lost against the sterling and a similar level knocked off EUR/USD. It looks like a continuation of past trends with bets against the US dollar increasing. The run through to the end of the year looks likely to be in favour of the euro against an under-pressure buck, but a figure of $1.55 remains around the right price for a top level. US retail sales due out today and earnings updates this week from the likes of Lowe’s, Home depot, target, Sears and Gap will provide a current insight into the health and psychology of US consumers heading into the important Christmas trading session. Federal Reserve Chairman Ben Bernanke is scheduled to speak late Monday and his speech is seen as key to determining the path of the dollar into the end of the year. Data 13.30: Advance Retail Sales 0.9% from –1.5%. Speakers 17.15: Fed’s Bernanke.
Forex Forecast – Sterling: A continuation of risk appetite in Asian trade this morning from Friday’s close of European and US markets has helped the higher yielding currency group, of which sterling is one. Looking at the sterling’s position against a weakening dollar is likely to trade with risks skewed higher this week as long as the pair stays above Thursday’s low of $1.6514, however sterling may struggle against the euro. Cable has now put on over a cent and a half against the dollar to push from Friday’s opening around $1.6610 to $1.6752 this morning. Against the euro, there has been an impressive move over the 1.12 levels from the 1.1031 levels seen late last week, but a move down in early Monday morning trading has seen GBP/EUR fall back to 1.1162. Looking ahead to this week, the minutes of the Bank of England’s November rate-setting meeting will shed a little more light on the views of the MPC after the central bank released its quarterly inflation report. Key, will be any possible dissent as regards to the £25Bn increase in QE and whether this dissent took the form of more aggressive action or no action at all. The sterling may be swayed lower if it turns out that more QE was favoured. The British economy’s path to recovery is likely to be bumpy, with surveys showing that business confidence fell for a second straight month in October as access to credit remained tight, while house prices dipped in the first half of November. Data already out: Rightmove shows house prices slip 1.6% MoM
Forex Forecast – Euro: The euro gained more ground on the dollar in Asia today as signs of strong demand for commodities including gold added to hopes that the worlds economy is recovering, prompting traders to buy high-risk currencies. This has however also helped the sterlings position, as the euro gave up over a cent to its UK counterpart. The euro’s position against the dollar however has become a lot clearer or less one-way after the volatility of the past couple of days and that’s set us back up for another run higher in the euro against the dollar through to the year end. EUR/USD has tested the $1.50 level on a number of occasions and it looks likely it will try again this week. The final reading of the October eurozone consumer price index today is expected to show a monthly rise while the year-on-year measure is likely to be unchanged. Data 10.00: E/Zone CPI YoY –0.1% from –0.3%
General:
The release of unexpectedly strong Japanese GDP for Q3 had no clear impact on the currency markets, which were focused more on stock and commodities prices as well as up and coming US events.
Gains in gold prices lifted demand for currencies of commodity exporting nations like the Aussie against the buck.
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