Thread: Negative forecasts for EUR/USD

According to Commodity Futures Trading Commission’s data, hedge funds and other large speculators increased bets on euro’s decline against its American counterpart.

Analysts at TD Securities Inc. and Bank of America Corp. believe that the single currency will weaken versus the greenback even as the pace of US economic recovery declines. The specialists note that $950 billion European bailout program won’t be sufficient to restore the market’s confidence as investors’ concerns are strengthened by Portugal’s and Ireland’s summer credit rating reductions the yields on government debt of which reached the record high compared with German ones. It’s also necessary to mention that the cost of insurance against losses on Greek and Spanish bonds rose to 3-week maximum. In addition, the leading European Germany’s economy starts to show discouraging dynamics with unexpected 1.5% decline in exports in July.

Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. underline that although both European and American currencies are weak, euro area’s problems are much more severe than US ones and this fact will certainly affect euro’s rate. Specialists at Royal Bank of Canada Europe Ltd. in London note that euro’s decline will accelerate due to the effects of austerity measures on the region’s economy.

Economists surveyed by Bloomberg expect that the common currency will trade at $1.25 by the end of 2010 decreasing to $1.22 in 2011.

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