Currency Forecast – When to BUY or SELL?? ( Andrew Bromley )

USD Forecast

We tend to open with news and forecasts surrounding the Euro, however the US Dollar has recently moved in to a very advanced position. Friday afternoon saw a strong gain for the Greenback, following positive comments from Federal Reserve member Lacker towards an Interest Rate hike in June. Lacker indicated that unless very poor economic data was released, the period of easy money should be changed via a hike. The FED have been open in indicating that they will look to raise rates soon, however the market reacts strongly (in both directions) when an indication or statement provides a direction / timescale. Generally speaking an Interest Rate increase is a sign of economic strength, so a July hike brings Dollar strength, and September and beyond speculation brings weakness.

I personally feel that we won’t see an increase in June or July, more realistically September at the earliest. I think at it’s best GBP-USD will hit 1.43 against the pound and I also think that the Dollar will push forward to parity against the Euro. However it will not be a straightforward journey! We saw Friday week ago the impact of poor US employment data – GBP USD moved 4 Cents very swiftly! I wouldn’t be surprised to see best prices of below 1.45 at times, with 1.49 – 1.50 at worst.

EUR Forecast

Greece has been back in the news as they struggle to sort their finances out. Links have been made between the Greeks and Russians and a potential bailout from Putin. Greece is located in a potentially desirable area for Russia (lots of coastline) so would the bailout funds come with a small land trade off? Worst case scenario speculation but anything seems possible these days! It is also worth noting that when Cyprus collapsed billions of units of Russian owned currency left the island immediately prior. A nice little offshore tax haven would be welcomed by Oligarchs looking to hide their Roubles!

I feel that the Euro has seen its weakest (when as low as 1.42 against the Pound) as the Quantitative Easing programme has now kicked in. This provides cheap capital for the Eurozone businesses, potentially the catalyst for economic growth. Against the Pound I feel the GBP-EUR trading range will be 1.35-1.39, with 1.35 becoming a more realistic figure in the build up to the UK General Election…

The UK General Election build up seems to be in full swing now, with parties at full loggerheads over policies. David Cameron’s Tory Party have announced plan to reform Inheritance tax levels, with £1,000,000 now billed to be the taxable level. We know that this is a hook to entice undecided voters to vote Conservative, however that’s probably not a bad thing for the Pound! The outcome will probably be a hung parliament, bringing weakness from the uncertainty. I’d be inclined to act prior to the General Election if buying a currency with Sterling, as the future is harder than ever to predict!!

If you have a currency requirement, please feel free to get in touch. Either drop me an email to [email protected] or call the trading floor 01494 787 478. Please ask for me (Andrew Bromley) and quote this blog!