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Camilla Sutton
Scotiabank Group Chief Currency Strategist
1) In the recent Scotiabank Group's forecast you state that the euro will be weakening in the next three months and will remain around 1.30. Why do you think that is likely to occur?
I see the Euro moving to 1.25 perhaps in the near term which will occur as a result of a collapse in confidence overall. The indicators will continue to point the Euro downside. We are forecasting 1.29 for the Q1 as we have some expectations on stability near the very end of the quarter. I suspect the lowest point the Euro can reach is the 2010 lows of 1.1877.
2) Some analysts forecast a severe drop of the Euro to 1.10 being worried over the European policymakers' possible inability to reach consensus on the debt crisis. Do you think that such a pessimistic forecast is justified?
I think that it is obviously a real risk and clients will be well-advised to pay attention to those risks. However, for us it is more of a question that the ECB likely does not step in with broad excessive purchasing programme and that at some point there is some agreement made, so that we do get down to those lows we saw in 2010, however, we do not move significantly lower than they are on a sustainable basis. The ECB does not move towards large scale purchases, it will not shift to the same type of Quantitative Easing we see coming out of the US. That would also be an argument for some stability of the Euro.
3) Do you consider that the Merkel and Sarkozy's meeting 9. Jan might be a breaking point for the Euro?
No, I do not think that today is a breaking point. I believe that it is likely to disappoint those who expect the positive uptrend of the Euro after the meeting.