* The last thing the euro zone needs is an appreciating currency. As a result of the reversal of the safe-haven effect on the greenback begun a few months back, the euro remains over-valued in trade-weighted terms.

* In addition to Ireland having its credit rating downgraded recently by Standard & Poor’s, the ECB’s firepower is petering out again: Money-supply growth in Europe has just reached a 12-year low.

* Given that the U.S. leading economic indicator is back in positive territory for the first time in 22 months and some forecasters expect real GDP to begin growing again in the third quarter, the chances of seeing a repeat of the 2004 scenario are good. Accordingly, the dollar should begin to realign with the euro when the Fed starts hiking rates again.

* May’s bionic loonie has finally dipped a couple of notches to more reasonable levels. The recent cooldown in commodity prices should keep the Canadian dollar in check over the coming months. On the assumption that oil prices will hover around US$60 a barrel, the loonie should hold closer to $0.85 than to $0.90 in the months ahead.

* Canadian exporters can therefore heave a sigh of relief and should seize the opportunity to do some currency hedging for their international transactions before the eventual global recovery sets the loonie on a sustainable uptrend.

Forex - U.S. Dollar: Cyclical and Structural Forces in Tug of War by National Bank of Canada

* Standard & Poor’s downgrading of its credit rating outlook on the United Kingdom from stable to negative rattled the exchange markets and caused the fiscal sustainability of the principal advanced economies to be reassessed.

* Normally, the desynchronization of U.S. and European monetary policies will push the greenback to gain at least 10% on the euro over a period of one year. In the next 12 to 18 months, the positive cyclical forces of the greenback should dominate the negative structural forces related to the worsening of the U.S. budget deficit.

* For the first time in history, commodity prices are literally miles ahead of the actual state of the real economy. This, in turn, is driving up the cyclical currencies, including the Canadian dollar.

* At present, the loonie exceeds its long-term equilibrium value by nearly 10%. However, unlike in October, the price of oil today is less than $70 a barrel and Canadian export levels are depressed. As the Bank of Canada cannot modify its position on quantitative easing, the loonie will depreciate only if the greenback appreciates across the board. In the end, if our forecast regarding the euro proves right, the loonie should come down a few cents from its current level.
Full Story

Euro will drop to 1.3600 in 3Q and soar to 1.55 in 2010 - BMO Capital Markets

FXstreet.com (Barcelona) - Euro rally from levels below 1.3000 in mid April to the 5-month high at 1.4335 reached oon today’s Assian session, might be coming to an end, according to the BMO Capital Markets Economic Research Team, which advances a decline to levels around 1.3600 in the third quarter of the year.

The BMO Capital Markets Economic Research Team, expects the EUR/USD to average 1.4100 in the second quarter of the year, to drop to 1.3600 average price in the third quarter and then back to 1.4000 in the last quarter of the year.

For Next year, the BMO Capital Markets Economic Research Team expects a continuous rally for the Euro Dollar, from prices around 1.4400 in the first quarter, the Euro will reach 1.4800 in the second and 1.5100 in the third quarter, to close the year at prices around 1.55.
For more information, read our latest forex news.

Could this change the view of David Solin that EURUSD is getting close to a large upmove towards 1.4715?

EUR/USD: Reserve balancing by Russia likely to add downside pressure on EUR/USD by Danske Bank

Francesc

It seems I can beguin the year happy

You know that we support USD strength as we get paid in USD and we live in the EUR zone.

EUR/USD: Resuming bullish trend by Danske Bank

I´m hopping that a break below yesterday’s low at around 1.3310 will demolish Danske’s picture and EUR/USD could be testing 1.2970. But I´m seing Nicole Elliot at Mizuho Bank recommending a buy at 1.3515; stop below 1.3300.

EUR: Buy at 1.3515; stop below 1.3300 by Mizuho Bank

The ods are not with me

Francesc

Hi everyone

For those of you that your family allows you to have some spare time this days to read, here you have an interesting monthly report from la Caixa, one of the three biggest banks in Spain.

http://www.lacaixa.comunicacions.com/se/ieimon.php?idioma=eng&llibre=200812

Francesc

Interesting read

Francesc

Euro Can You Spare a Dime?
This week US government debt breached the $10 Trillion barrier for the first time in history of the republic. Non Farm payrolls lost 159K jobs. The Congress passed the biggest boondoggle against the will of 9 out of 10 the voters it represents. And yet the dollar rallied to yearly highs against the euro. For the beleaguered euro bulls it was truly a week of wonderment and mayhem.
Full Story