Forex Predictions for 2009
Posted on 30 December 2008 by Administrator
The past year has been particularly nice to the Euro. The now 10 year old currency of the European Monetary Union has quickly gained status as a safe heaven for investors in times of financial crisis. In contrast, the British Pound has decreased much in value and paired the Euro at the end of the year. The British economy is facing serious problems that will not be solved quickly. The U.S. economy does not look to be in a better shape, which is reflected by the federal interest rate of zero to 0.25%. The future trade value of the USD and GBP against the Euro will mostly be influenced by the strength of the European economy. The European Central Bank still has a lot of flexibility in its central interest rate while the Americans and British have very limited room to move with rates nearing zero percent. The current success of the Euro is for most part the result of relatively stable interest rates but it has to be seen if this policy won’t hinder national governments from tackling the credit crisis.
My expectancy for 2009 is that current trends will continue. The Euro will further gain in value against the Dollar and the Pound because of relative stability of the European economy. I believe that the European market place has become less dependent on the American economy and that the fragmented nature of the European Monetary Union will prevent the ECB from large rate cuts in the upcoming months.
The second half of the year could change the direction of the pairs. The US and British economy might show signs of recovery which will create expectancy for slow rate increases. In case of global recovery the Euro will depreciate because of the same reasons it increases in value in times of crisis.
To sum up I advise traders to buy Euros and to get rid of their Dollars and Pounds. The current trend in EUR/GBP and EUR/USD is far from over and will not change in the first half of the year.
Do you agree with the writer? Tell the world what you think and share your opinion by commenting on the predictions being made.
I have to see about this. I think that the strength of the Euro is largely overrated, and the fact that it does so well at the moment is merely a result of low transparency. Because Euro value is a product of the economic state of several countries together, it is difficult to measure.
I think that the beginning of 2009 will see a lot of bad news about the European economy, increasing the need for further rate cuts by the ECB and thus lowering Euro value.
The ECB is just too conservative to do some serious rate cuts. The Fed understands the exceptional circumstances we are facing and makes serious effort to stimulate the economy. The US economy will therefore recover much faster than the European, and it will not take long before we’ll see this in the exchange rates. Traders are looking at future value, not current. The USD is set to gain some serious strength and I will not be surprised to see it pair the Euro before 2010.
I don’t think that EUR/GBP will continue its bearish trend and I expect a retrace to around 0.80 within two months.
The high Euro reduces the competetiveness of the European economy which will increase the problems. UK can benefit from its weak sterling, boosting the economy for faster recovery. We might see the results of these effects in the second half of 2009, when the current trend will turn around. I therefore agree with the predictions being made here.
The ‘Obama effect’ will increase Dollar strength in the first months of his term.
I predict a very bearish week for EUR/GBP despite the rate cut by the BOE at Thursday. The rate cut has already been priced in. The comments from one of the ECB members this weekend will provide weakness to the Euro.
USD and GBP are gaining some ground today! This could be the beginning of a larger trend in the coming weeks. So be careful to enter short positions for these currencies…