Focus FX - Currency Forecasts on September 2009

25 August 2009

RAIFFEISEN BANK S.A.

 

EUR/USD: 1.427 - 1.45 (September)

The correction on the equity markets did not last long. On the back of surprisingly positive economic data - considerable gains on the Philadelphia Fed Index and a substantial rise in existing home sales in the USA - the Dow Jones surged to 9500 points and the DAX finished above 5500, with the euro riding in on their coattails. In light of subsiding risk aversion, the euro peaked at EUR/USD 1.435 - a 3-cent gain since the beginning of last week. Following profit-taking, the euro is currently trading just under EUR/USD 1.43. Because the exchange rate is now hovering around our September target of EUR/USD 1.45, we are sticking to our recommendation to remain neutral.

We would only see opportunities to buy in the short term if the euro were to move back towards its June low of EUR/USD 1.38 as part of a substantial correction on the equity markets. This is unlikely, however, due to the fact that economic data should improve noticeably in the coming weeks - both this week (durable goods orders in the USA, ifo Business Climate Index) and in the coming weeks/months (e.g.US-ISM above 50). A correction on the equity markets would thus be viewed simply as a dip in an overall upward trend. In the medium term, stocks and the euro should post further gains.

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