Exchange Rate Predictions - GBP, EUR, USD, CHF, AED, HKD

March 2, 2011 - Written by John Cameron

STORY LINK Exchange Rate Predictions - GBP, EUR, USD, CHF, AED, HKD

POUND STERLING

The Pound lost some ground in yesterday’s session due to dovish comments from Mervyn King. This morning’s PMI Construction sector figure came out significantly better than expected in February, helping to fuel speculation that the real economy in the UK is waking from its slumber. However, the chances of a rate hike in the near-term remain slim due to persistently high unemployment, negative growth in Q4 and the effects of hefty government cuts. NEAR-TERM OUTLOOK – NEUTRAL.


EURO

In contrast to its UK counterpart, the ECB has peddled a consistently hawkish tone on interest rates, with ECB speakers regularly referring to concerns over Eurozone price pressures. Tomorrow’s ECB interest rate decision is likely to see rates remain at their current 1% level, however ECB President Trichet’s press conference which follows is likely to be of a hawkish tone, providing the Euro with some support. NEAR-TERM OUTLOOK – NEUTRAL TO POSITIVE.


US DOLLAR

The benchmark S&P 500 share index has lost over 1% in early trading today, following yesterday’s significant losses. Leading indicators suggest that global risk appetite is easing off, which would ordinarily help the Dollar, however the USD has suffered on the markets today, with EUR/USD up by 0.8% on the day and GBP/USD gaining by 0.5%. Fed Chairman Ben Bernanke’s comments yesterday that rising oil prices would provide a threat to the US recovery have hurt the Dollar. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.


SWISS FRANC

The fundamentals of the Swiss economy look strong, with yesterday’s Q4 GDP figure coming out far better than expected and unemployment remaining low. The Franc continues to pick up safe-haven support as institutional investors shift their funds out of equities and into safer options. USD/CHF broke to a new multi-year low of 0.92 during today’s European session, so the Franc now trades in a region with very little technical support to stop the rate going even lower. NEAR-TERM OUTLOOK – POSITIVE.


ARAB EMIRATES DIRHAM

The Dirham remains directly pegged to the US Dollar, so any relative strength in the USD is directly mirrored in Dirham movements. This means that the Dirham currently trades at significant lows against the majority of the major currencies. With the Dollar being used less and less a reserve currency during flights to safety, the effect of the Arab uprising is likely to have a negative effect on the Dirham as rising oil prices weigh heavily on the real economy in the States. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.


HONG KONG DOLLAR

The Hang Seng lost 1.49% during last night’s Asian session, causing the HK Dollar to lose ground as local investors moved their funds out of HKD assets into the safe haven currencies. This caused the USD/HKD rate to pick up. However, the HKD continues to trade closer to the bottom end of its range against the USD than the top, so for technical reasons, an upward move is possible. Sterling continues to trade up against the HKD and GBP/HKD touched a new multi-year high of close to 12.73 on the day today. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.

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