Euro, Pound & Japanese Yen Forecast - EUR and JPY Exchange Rates Predicted to Improve; Sterling Gains Before Vote

September 16, 2014 - Written by John Cameron

STORY LINK Euro, Pound & Japanese Yen Forecast - EUR and JPY Exchange Rates Predicted to Improve; Sterling Gains Before Vote

Currency exchange rate speculators forecast that the bad times may be nearing an end for the euro (EUR) and the Japanese Yen (JPY). Meanwhile, analysts predict that the Pound Sterling (GBP) may suffer renewed selling pressure.

Price action in the global foreign currency markets is driven by trades from speculative investors. The latest figures from the World Bank suggest that over 90% of the daily $5.3tn which is transacted is put forward by speculators, so it often pays to look at which way they forecast the major currencies will move.

Each Friday the Commodity Futures Trading Commission publishes a list of the long and short positions held by market participants on the world’s major currencies and it makes for interesting reading. The latest edition of the data revealed that the number of ‘long’ positions held on the euro, (predicting that the single currency would strengthen), had remained static at just over the 59,000 level in the week leading up to 9th September. However, the numbers also showed that the number of ‘short’ positions from speculators had dropped from 220,821 the week before to stand at 216,881.

The numbers hint that market participants are increasingly of the opinion that all of the bad news from the eurozone is now out in the open and that the euro has reached a point where it has been oversold. The fact that the European central Bank has now effectively thrown the ‘kitchen sink’ at the potential problem of deflation which hangs over the euro area by announcing that it will embark upon a Quantitative Easing programme next month, would probably back this up. Any renewed gains for the single currency on the back of this speculative sentiment would be likely to send the Pound Sterling euro exchange rate back down towards the 1.2000 GBP/EUR threshold once more.
The Commodity Futures Trading Commission figures also showed that investors remain relatively negative on the future prospects for the Japanese Yen, holding a total of 100,673 net short positions on the Japanese tender during the seven days leading up to 9th September. However, this was also down from the previous week’s total of 117,308 – a reading which suggests that the Yen may be turning a corner in the markets.

The most recent Commodity Futures Trading Commission numbers showed a marked improvement in sentiment towards the Pound Sterling, with a total of 26,727 net long positions being held on the UK unit versus 9,448 the week before. However, this near-term improvement in sentiment towards the Pound may be stunted by this morning’s UK CPI inflation numbers which showed that the rate of domestic price rises had tumbled to a lowly 1.5% last month.

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TAGS: Currency Predictions Euro Forecasts Euro Pound Forecasts Japanese Y Forecasts