Foreign Exchange Rates: Currency Predictions - GBP, EUR, USD, NOK, TRY, AED

February 23, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Rates: Currency Predictions - GBP, EUR, USD, NOK, TRY, AED

POUND STERLING

Minutes of the Bank of England’s February meeting, released earlier today, revealed that three of the nine member committee voted for a hike in the central bank rate of interest. The minutes also suggested that the six members who voted to maintain rates at their current record low of 0.5% might reconsider their decision if Friday’s quarter 4, 2010 GDP figure showed an upward revision to the initial estimate of -0.5%. NEAR-TERM OUTLOOK – NEUTRAL.


EURO

The Euro has made significant gains during today’s European session, strengthening by almost 1% against the Dollar and picking up the best part of 0.5c against the Pound. These gains are partly due to comments made by ECB President Jean Claude Trichet in Frankfurt today. Trichet commented that ‘policy-makers will take the decisions necessary to maintain price stability’ in the Eurozone. This is the latest in a line of hawkish comments by ECB members. Suggestions by German officials yesterday that they may be willing to assist their debt-burdened neighbours has also helped the Euro. NEAR-TERM OUTLOOK – NEUTRAL TO POSITIVE.


US DOLLAR

Risk sentiment continues to ebb as the Arab crisis rolls on. This return of risk aversion to the markets has manifested itself by weakening the high-yielding currencies and ordinarily this would cause Dollar strength as institutional investors shift their funds into the safe haven of the US Treasury Bill. However, the Dollar itself has weakened today, uncharacteristically moving in the same direction as equities markets. This could be due to spiralling oil prices which tend to hurt the US more than most as it is the world’s foremost net importer of crude. NEAR-TERM OUTLOOK – NEUTRAL.


NORWEGIAN KRONE

The Krone enjoyed another positive session on the markets today as it continued to benefit from the recent appreciation in crude oil prices. Brent Crude futures touched $110 per barrel today and analysts have suggested that if the Arab uprising intensifies, then a test of record prices of $147 per barrel is possible for later in 2011. This would be massively supportive for the Krone and would cause investors to put fears that Norwegian policy-makers are seeking a weaker Krone to the back of their minds. NEAR-TERM OUTLOOK – POSITIVE.


NEW TURKISH LIRA

The Lira remains under pressure because of its use as a proxy currency for traders looking to place down-bets on the Egyptian and Libyan currencies. The Turkish Central Bank chose to keep interest rates at a record low last week, sparking optimism in the markets that the recent Turkish rate-cutting cycle may be at an end. However, the decision has failed to cause the strengthening of the Lira that some analysts had predicted. The Dollar is currently trading at 1.6000 against the Lira, having been at below 1.4000 as recently as last November. The market adage, ‘what should go up and doesn’t go up can only go down’, may prove appropriate for the Lira. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.


ARAB EMIRATES DIRHAM

The Dirham is directly pegged to the US Dollar, meaning that, against expectations, it has endured a negative day on the foreign currency markets. A reduction in global appetite for risk would ordinarily cause the Dirham to strengthen, but the reverse has been evident today, perhaps because rising oil prices will harm the Dollar/Dirham disproportionately. NEAR-TERM OUTLOOK – NEUTRAL.

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TAGS: American Dollar Forecasts Currency Predictions Euro Forecasts Norwe Forecasts