Forex Magnum


International Financial Outlook January 2010

Autore: Written by

Summary of main changes to exchange & interest rate forecasts

World economic recovery is underway, led by the emerging markets. When the data for Q4 2009 are in, they will show that all of the G20 economies - which together account for over 90% of world gdp - are expanding. This recovery has three main implications for financial markets in 2010. The first is that ultra loose monetary and fiscal policies put in place to kick-start recovery will start to be reversed. Second, this will likely lead to renewed volatility. Third, it is likely to change the dynamics of interest rate and FX markets in the months ahead.

US economic growth looks likely to have expanded by about 4% at an annualised pace in Q4 2009. This is likely to underpin the dollar in early 2010, especially as the implications of this economic revival become burned into expected interest rate differentials. Strong though this recovery is however, it is generally weaker than previous upturns following recession and could level off in the next quarter. If so, this may limit the upside for the US currency in the short term against other major currencies. However, it is also the case that there could be a much stronger appreciation of the US unit than currently expected.

After all, there are some signs that commodity currencies are rising based on assumptions about demand that seem hard to square with the weakness in the world economy as a whole compared with the level of gdp at the peak in early 2008. But growing signs of global recovery should continue to support commodity prices in 2010, underpinning the currencies of major exporters. However, we believe the potential for further strong gains may be limited by the exceptional performance in 2009.

We expect data later this month to confirm that the UK economy returned to growth in the final quarter of 2009, belatedly ending a record sequence of six successive quarterly declines and an overall gdp drop of around 6%. However, we forecast only a muted recovery in 2010, with economic growth of close to 1%, after a fall of 4.6% in 2009. This primarily underpins our view that Bank rate will remain at a record low of 0.5% throughout 2010, while the risk of a further expansion of the APF is larger than many currently envisage. The publication of the minutes of the January 6-7 MPC meeting should give a good steer about whether the BoE will remain pat at the February meeting. We believe the first half of 2010 could prove particularly volatile for the pound, with key uncertainties surrounding the upcoming General Election and outlook for economic growth and inflation. We forecast £/$ at 1.52 and £/€ at 1.12 at end June 2010.

The out-performance of the emerging markets is likely to remain a key feature in the year ahead as the global economy returns to positive growth. After comfortably avoiding contraction in 2009, albeit largely underpinned by the unexpectedly strong resilience of China and India to the headwinds sweeping the global economy, the prospect of a more generalised rebound looms large in 2010. However, there will still be winners and losers, with financial markets rewarding the best and punishing the worst performers.

With the risks posed by inflation greatest in the developing economies at this time, official interest rates are likely to be raised sooner and more aggressively in emerging markets. We expect the Asian economies, which are further down the road to recovery, to lead the way - with India possibly raising the cash reserve ratio later this month. China has raised its reserve requirement ratio by 50 basis points effective from January 18. The prospect of widening interest rate differentials should continue to underpin Asian currencies in the year ahead. We expect China to resume gradual renminbi appreciation against the US $ in the first quarter of 2010.

Lloyds TSB Bank

Disclaimer: Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.


Sei un Analista Tecnico Indipendente Professionista del mercato FOREX? Registrati anche tu nella comunità ed elabora insieme a noi strategie automatiche di successo! Dettagli


Sai programmare in MQL o usare il MetaTrading? Registrati e contribuisci alla programmazione di trading system, script e indicatori per MetaTrader. Dettagli


Ti piace il Trading? Vieni in Trading Room a Cosenza, guarda le analisi tecniche real time dei nostri indicatori e decidi quando entrare nel mercato. Corsi base ed avanzati. Dettagli

Non esistono ancora Commenti per questa news.

Archivio News


FX Forecast Update: Low Rates for Longer - Greek Impact on EUR Loses Momentum

Global Markets: Once More Unto the Breach, Dear Risk

Research Euroland: The Weakest Link

Monthly Economic Outlook - March 2010

International Financial Outlook March 2010

Research US: Recovery On Track, but Not Fast Track

FX Forecast Update: Single Currency - Multiple Worries

The Australian Dollar Outlook

Monthly Economic Outlook - January 2010

International Financial Outlook January 2010

Financial Markets Monthly - January 2010

FX Themes for 2010

2010 Outlook & Trading Themes

Annual Economic Outlook 2010 - Rebalancing the U.S. Economy for a New Course

Global: Market Themes in 2010

The Labor Market Pain Conundrum

Monthly Economic Outlook

Financial Markets Monthly - November 2009

International Financial Outlook November, 2009

What Is Gold Telling Us?