© Dr. Valentin Hofstatter
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Obviously, it increases discussions in the market whether the Fed can really move along tapering so far as Mr. Bernanke put ahead. Personally, I do not think that GDP figure for the first quarter is important as it is rather old data. What would be more decisive when the Fed starts decreasing bond purchases is how fast the employment market recovers further. Therefore, it would be monthly payroll reports, the number of new jobs created and unemployment rate that will determine whether the Fed really can decrease bond purchases in the Q4. We believe that employment market reports will continue to remain pretty strong. For this reason, old data like GDP for the Q1 do not have a major impact.
Nevertheless, it is true that Mr. Bernanke has made the further path of monetary policy in the U.S. very dependent on the economic data. Therefore, going forward markets will remain pretty volatile over this summer as every data will be exaggerated in the market.
What is your short-term outlook for US Dollar?
I think the risk in the short term is to the downside, with the forecast for EUR/USD being 1.31. However, we might see a drop below the 1.30 level over the summer, thus the cross might touch 1.29-1.28 before slowly recovering back to the current levels.
What is your forecast for EUR/USD and USD/JPY for the end of Q3?
We expect EUR/USD currency pair to trade at the 1.31 level and USD/JPY at 103 in the third quarter.