Focus FX - Currency forecast for March 2010
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15 Decembrie 2009 |
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RAIFFEISEN BANK S.A. |
Adresa
Piaţa Charles de Gaulle, Nr. 15
011857 Bucureşti, Sector 1
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+40-21-306.10.00
+40-21-306.16.22
Fax
+40-21-230.07.00
Website
www.raiffeisen.ro
EUR/USD: 1.456 - 1.50
Last Friday's consumer data was significantly better in the USA, as retail sales were well higher than consensus at +1.3% mom and the consumer confidence survey of the Univ. of Michigan rose by 6 points to 73.4. The strongest reaction to the data came from EUR/USD which plunged to 1.46 and then sank further to 1.455 this morning (the US data are now so good that better data are leading to stronger expectations of rate hikes, which is providing support for USD). As a result, our correction target of 1.44/45 has almost been reached, and this correction could easily also continue over the short term. Nothing is expected to change with regard to the positive economic data this week (cf. Market Outlook from Friday), and the higher US inflation rates expected tomorrow could even fuel more worries about US interest rate hikes over the short term. As a result, the US central bank meeting on Wednesday evening promises to be very interesting: if the meeting bolsters expectations of rate hikes, EUR/USD would probably react with more strong declines. But this is not what we are expecting the US central bank to do, as a rate hike remains something to think about in the distant future.
Another problem for the euro is certainly also the debate on the creditworthiness of Greece: nonetheless, we see the worries in this regard as being exaggerated and, as we noted in our special note on Friday, we would even prefer short- and medium-dated Greek government bonds right now.
Both of these sets of worries on the market (imminent US rate hikes and liquidity problems for Greece) could possibly grow worse in the weeks ahead, but in the end we believe that they will turn out to be tempests in a tea cup. Accordingly, after this current phase of weakness, EUR/USD should bounce back to over 1.50 in H1 2010, and hence buying EUR versus USD looks like a good idea as soon as this correction runs out of steam. One good initial opportunity for this may arise if the US central bank is successful in putting a lid on the market's interest rate expectations on Wednesday evening.
OPINII
