Exchange Rate Predictions - GBP, EUR, USD, JPY, NOK, INR

March 3, 2011 - Written by John Cameron

STORY LINK Exchange Rate Predictions - GBP, EUR, USD, JPY, NOK, INR

POUND STERLING

The Pound opened the day on the back foot with the release of worse-than-expected Service Sector results. It struggled to recover throughout the session and in the absence of any further data for the remainder of the week, is likely to continue to trend downwards. Next week’s bank of England Interest Rate announcement is highly unlikely to provide any further support. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.


EURO

As expected, the European Central Bank elected to maintain their key lending rate at 1.00% earlier today. However, ECB President, Jean Claude Trichet, used the press conference which followed to appeal for ‘strong vigilance’ towards escalating price pressures in the European economy. The ECB’s inflation forecasts for 2011 and 2012 were significantly increased. Following these comments and adjustments, a Eurozone rate hike looks highly likely before summer. NEAR-TERM OUTLOOK – POSITIVE.


US DOLLAR

This afternoon’s US labour market data came out better than analysts had been expecting, leading to hopes that tomorrow’s Non-Farm Payrolls figure will show a pick-up in job creation. Rumours of a peace plan for Libya, backed by the Arab League, have caused a revival in global equities markets. The net effect of these developments is an improvement in global risk sentiment, causing a shift out of the Dollar. NEAR-TERM OUTLOOK – NEGATIVE.


YEN

Political uncertainty is causing downward pressure on the Yen, with Japan’s opposition party refusing to support government proposals to create YEN44.3trillion worth of Japanese treasury bills to inject liquidity into ailing Japanese credit markets. Japan continues to grapple with deflation and an expansionary budget intended to boost aggregate demand will place Japan further into debt. NEAR-TERM OUTLOOK – NEGATIVE.


NORWEGIAN KRONE

Norway continues to place its currency strategy at the forefront of its economic policy, with Finance Minister Sigbjoern Johnsen commenting earlier today that the country would pursue ‘a very restrictive finance policy’. This will involve cutting the central bank interest rate from its current 2.0% level and downing government spending. GBP/NOK is currently sitting just above the key support of 9.00 which it has bounced off several times in the last 12 months. The development of a new uptrend is possible from a technical perspective. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.


INDIAN RUPEE

The Rupee continues to trade in a sideways range against Sterling. The GBP/INR rate currently stands at 73.13 with strong support at 72.50 and resistance at 73.50. Food inflation slowed this week in India, but remains over 10%. However, the Rupee lost ground when the Reserve Bank of India deputy Governor commented that hiking interest rates would not serve to dampen this key type of inflation. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.

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