Arne Lohmann Rasmussen, Head of FX Strategy at Danske Bank, and Georgette Boele, Head of FX & Commodity Strategy at ABN Amro Bank, on EUR/USD
South Africa's Rand is a commodity currency, thus the global growth outlook and commodity cycle will typically be principle cyclical drivers of the currency.
The Dollar has been weak since the end of August, when the Fed Chairman Ben S. Bernanke made it clear that further quantitative easing was in the pipeline, and there were increased incentives for US investors to move money overseas.
That is surely a contentious issue right now, the Dutch disease debate. Mark Carney, the governor of the Bank of Canada, about two-three weeks ago, made a speech specifically addressing that issue.
The Rouble performance for the last, let us say, one-two months was relatively good, but after the QE3 announcement by the Fed, the currency appreciated very sharply.
This asset-purchase programme has been around for quite a while, this is actually the 7th time that the Bank of Japan expanded the asset-purchase programme and from what we have seen in the past, Japan is still facing deflation.
In fact it is unlimited and coupled to fundamental aspects of the economy. The Fed has clearly said that the unemployment rate is too high and the policy makers are willing to purchase $40 billion worth of mortgage-backed securities to stimulate the economy, and to bring down financing conditions as long as unemployment rate has not come down substantially.
If they do not, the Euro will move back, probably below 1.28-level. If they do, I think the market will attempt to take EUR/USD to a 1.30-figure.
As the Swiss economy weakens and deflation gets established in Switzerland, the Swiss Franc will weaken on its own accord, particularly if the recent ECB's bond-buying policy is successful in stabilizing the Eurozone
It is pretty much pre-announced that they are going to engage in conditional bond-buying, meaning that they are going to buy the bonds of some European countries. That is contingent upon these countries, which are applying for Troika's financial support that is seeking a conditional aid-driven programme.
Technically it is justified, because if components of the European Union, including the most important and healthiest economies such as Germany, the U.K., and the Netherlands get a negative outlook attached to their triple A rating, then it is logical that the EU will also get such a negative outlook. Thus, from the technical point of view I can understand
It was a very slight disappointment. In the run-up to Ben Bernanke's speech, EUR/USD gained some ground.
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Currently our stance is long across the Yen.
I think the outcome of this meeting will be all in all supportive for the Euro, because lots of concerns about possible end of the bailout for Greece have already been priced into the Euro.
The Eurozone's current problems arise from a crisis of insolvency among some members. Eurozone policy makers, however, have reacted as though they are facing a liquidity crisis.
Germany is one of the strongest economies in the Eurozone. The labor market reforms that were enacted in the last decade have given Germany the flexibility to respond to the dynamic economic situation created by the financial crisis.
There has been a boost to sentiment towards the Euro over the past couple of weeks from a potential action of the ECB.
There is nothing at the moment that suggests it. The trend will not continue, but I think the Canadian Dollar is probably looking a little bit overdone at these levels.
Currently the Aussie is very well supported on dips, particularly given there is such a divergence between the Australian monetary policy, which is firmly on-hold at the moment, and the prospects of looser monetary policy in the U.S. and Europe.
I think the Yen is currently around its fundamental fair value, but before that a better level of the Yen has seen corporate profitability in Japan coming under some downward pressure.
The Sterling has gained despite the Bank of England announcements for further asset purchase and the new measures to support the economy such as funding for lending and etc.