© Valentin Hofstatter
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Valentin Hofstatter
Head of Bond Market/Currency Research at Raiffeisenbank
For the EUR/USD we believe there will be pressure in the Q1. The pair could easily hit the 1.25, but basically, the recovery will follow over the remaining part of the year 1.30 up to 1.35. The main reason is that we see various episodes of Eurozone's stress intensifying in the Q1 with many potential catalysts, be it the escalation of the troubles or the downgrades of the Eurozone countries. This will pressure the Euro in the short-term, of course. Nevertheless, we are confident that Euro will be able to avoid the catastrophe.
All the problems are well-known to the investors and the European Central Bank is making a floor for the Euro in any case. We were quite pessimistic on the Euro last year expecting it to be at 1.30, even above 1.40 in the Q2 from time to time. I assume that there was enough opportunity for selling the European common currency last year. We are hard-pressed to see who else should be scared to run out of the Euro. The positions are already very lop-sided in the short positioning on the Euro. We consider that quite a lot of selling pressure has already occurred.
EUR/CHF
For the following pair there is evidence of a pretty tight range trading. We suppose that 1.20 will hold simply because the SNB has enough room talking about inflation pressure to defend the ceiling of 1.20. For the rest of the 2012 we feel that it might go slightly above the ceiling and remain between 1.21 and 1.23 most of the time going sideways for the next three or four quarters.
EUR/JPY
For EUR/JPY it is more or less a reflection of what is happening with the EUR/USD. We expect a strong Yen, but the Bank of Japan will definitely protect the JPY from appreciating below 75. Therefore, if you see the Euro weakening against the US Dollar and the Dollar declining against the Yen, there will also be a downtrend of the EUR/JPY - it is going line in line with our forecast. We would await the Euro then to recover insignificantly against the Yen back up to the area of 105-107.