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Deutsche Bank: 2012 forecast for GBP/USD Analysts at Deutsche Bank expect British pound to lose versus the greenback in the first half of the next year. At the same time, the specialists underline that sterling’s decline will be contained by $1.5100. According to the bank, the pair GBP/USD will slide to $1.5300 in the first 3 months of 2012, and then fall to $1.5100 in the second quarter before rebounding to $1.5700 by the year-end.

JPMorgan Chase: forecast for USD/JPY Analysts at JPMorgan Chase believe that the greenback may renew record minimums versus Japanese yen in 2012. In their view, in the first half of the next year USD/JPY will stay range bound due to the recession in Europe and weak economic growth in the rest of developed world. In the second half of 2012 global economy will start stabilizing and the euro zone’s crisis will be moving to the resolution. As a result, the risk sentiment will improve. The economists think that the demand for US dollar as a safe haven will fall and it will go down versus the most of its counterparts including Japanese currency. The strategists claim that the next year the pair may hit the levels of 70-72 yen. According to JPMorgan Chase, the risk of the Bank of Japan’s interventions aimed to weaken the national currency won’t prevent investors from buying yen as their effect will still be too short-lived.

MIG Bank, KBC Bank: euro’s gaining versus pound The single currency is gaining versus British pound for the third day in a row as the market expects the Bank of England’s November meeting minutes (released tomorrow at 9:30 GMT) to show that the policymakers are inclining to more monetary stimulus to encourage the nation’s weak economic growth – UK Prime Minister David Cameron claimed yesterday that the growth figures are unsatisfactory. As a result, investors’ pound-negative sentiment didn’t fade even as the Office for National Statistics reported that the country’s net excluding support for banks contracted from 7.7 billion pounds a year earlier to 6.5 billion pounds in October. Analysts at MIG Bank note that the outlook for the pair EUR/GBP will turn bullish if manages to hold above 0.8652. Strategists at KBC Bank claim that support for the single currency lies at 0.8595, 0.8553 (this week’s minimum) and 0.8518 (November 15 minimum), while resistance is seen at 0.8665 (50-day MA).

Credit Suisse: the climax for euro area is approaching Analysts at Credit Suisse believe that in order to save the single currency European leaders –primarily, France and Germany – will have to reach by the middle of January “a momentous deal” to increase the degree of integration and transform the monetary bloc into the fiscal and political union. The specialists expect that in this case the ECB will agree to cut its benchmark rate and provide banks with longer-term funds and do all it can to prevent euro’s collapse. In their view, during the most critical moment the Italian and Spanish 10-year bond yields may surge above 9% and French yields may bounce above 5%. Bloomberg reports that for the hints on the euro zone’s future one should pay attention to the European Commission’s recommendations on euro-area debt which are to be published this week and by the French President Nicolas Sarkozy’s speech next month on the 20th anniversary of the Maastricht Treaty.

World Bank: East Asian economic prospects China: the economists expect soft landing – the nation’s GDP growth will ease down from 9.1% on 2011 to 8.4% in 2012. The nation’s inflation rate will decline from 5.3% this year to 4.1% the next year. Asia: economic growth of developing East Asia (without Japan, Hong Kong, Taiwan, South Korea, Singapore and India) will slow down from 8.2% in 2011 to 7.8% the next year. According to the World Bank, Asia will be able to withstand the negative effects coming from the euro zone’s debt crisis with help of their high reserves and current account surpluses.

Rating agencies affirmed US credit rating The greenback managed to recover a bit higher versus Japanese yen at the beginning of today’s Asian session as the major rating agencies affirmed US credit grades: - Standard & Poor’s: America will retain AA+ rating even if the Supercommittee fails to reach agreement on reducing the nation’s budget deficit by Thursday (US lost its top grade by S&P on August 5); - Moody’s Investors Service kept US rating at the top Aaa level with negative outlook; - Fitch Ratings repeated that there will likely be a downside revision to US rating outlook in case of the Supercommittee’s failure. Risk sentiment has slightly improved. The pair USD/JPY managed to get above 77 yen. However, there hasn’t been enough positive news to detain yen’s appreciation and the pair soon resumed decline drifting lower. Support levels for American currency are found at 76.75 (November 21 minimum) and 76.55 (November 18 minimum). Resistance levels for US dollar lie at 77.35 (today’s maximum), 77.50 (November 15 maximum) and 77.90 (November 9 maximum). It’s also necessary to note that investors are closing positions ahead of Japan’s holiday tomorrow and US one on November 24.

Commerzbank: comments on AUD/USD Technical analysts at Commerzbank note that Australian dollar breached yesterday support versus its US counterpart in the $0.9929/10 area (August minimum, Fibonacci level). The specialists expect AUD/USD to fall to $0.9688 (78.6% Fibonacci retracement) and plan to take profit at this point. If the bears keep pulling the market, the next downside target will lie at $0.9388 (October 4 minimum). According to the bank, resistance levels are situated at $1.0127 (resistance line), $1.0340 (November 14 maximum) and $1.0445.

UBS: forecasts for British pound In the short term the specialists see British pound under pressure versus the greenback as the Bank of England went through additional QE last month. In the medium term, however, UBS expects demand for sterling increase as the UK will act to reduce its budget shortfall and the declining inflation will make the real rates in Britain higher. The bank lifted up its 3- and 6-month forecasts for GBP/USD from $1.48 to $1.52 and from $1.62 to $1.65 respectively. The estimates of EUR/GBP future rate were lowered from 0.88 to 0.85 in 3 months and from 0.83 to 0.81 in half a year.

Moody's: France’s rating outlook may deteriorate Moody's Investors Service repeated its October warning announcing that the outlook for France’s AAA may be changed to negative. The risks to the nation’s rating come from the sustained rise in its debt yields combined with weakening economic growth. According to Agence France Tresor, France's average medium- and long-term financing costs for the first 11 months of the year accounted only for 2.78% – the second lowest level since the creation of the single currency. However, last week the nation’s 10-year bond yields surged to 3.7% and the spread over German bunds exceeded 200 basis points rising too the maximal level since France adopted euro. Moody's warned that if the increase in yields by 100 basis points means the increase of funding costs by 3 billion euro a year. Taking into account the fact that French government projects 1% GDP growth in 2012, higher interest burden will make achieving targeted fiscal deficit reduction more difficult. Many analysts believe that the only way to save the region from escalating borrowing costs and the potential recession is the bond buying at the secondary market by the ECB or the EFSF.

BMO: trading ahead of Supercommittee Here is another trading strategy on the approaching deadline for US Congressional deficit Supercommittee. Analysts at BMO Capital are pessimistic about the committee’s ability to come up with the budget solution. The specialists note that there are 3 possible outcomes: Democrats and Republicans will reach a deal on reducing shortfall by more than $2 trillion, by just the required amount of $1.2 trillion or they’ll fail to find a compromise and the nation will face automatic cuts. In their view, the latter variant is the most likely one. BMO advises traders to sell NZD/USD at current levels stopping above $0.7650 and targeting $0.7175.

Nomura: EUR/USD will fall by the year-end Analysts at Nomura expect the single currency to drop versus the greenback by the end of the year. In their view, as the euro zone’s debt crisis escalates, European investors will likely stop repatriating their assets. That will be another blow for euro. According to the data from the ECB, the region’s investors brought home 65.9 billion euro ($89 billion) in August and 11.6 billion euro in September – these figures significantly exceed 12-month average inflow of 629 million euro. Such demand made EUR/USD trade in November in the $1.3871/1.3422 area which is at least 12% above its lifetime average of $1.2042. Nomura believes that the pair will end 2011 at $1.30.

J.P. Morgan: buy Aussie versus US dollar Analysts at J.P. Morgan claim that as the situation in the euro area is worsening and the risks of contagion are mounting the possibility that the European Central Bank will have to step in increases. The specialists underline that if the ECB acts, the easing will most likely be conducted in the form of the rate cuts. In such case the yield for the euro gets less attractive. If the central bank decides to undertake bond buying, this will make investors concerned about inflation and weight on the single currency. At the same time, if ECB succeeded, this would be positive for euro. So, the economists expect the risk sentiment to keep deteriorating to the critical point where the ECB will be forced to save the currency union and then revive. The bank thinks that one shouldn’t lose trading opportunity here. According to J.P. Morgan, it’s necessary to open longs on AUD/USD in the $0.9500 area stopping below $0.9100. The economists expect the pair to rebound to $1.0500.

J.P.Morgan: comments on GBP/USD The Bank of England’s November meeting minutes are released on Wednesday, November 23 at 9:30 a.m. GMT. Analysts at J.P. Morgan believe that British Monetary Policy Committee will sound extremely dovish. The specialists also think that US Congressional deficit supercommittee won’t come up with the debt reduction steps. As a result, the market’s risk aversion, in their view, will remain very strong. Negative risk sentiment, in its turn, will make sterling decline versus the greenback. According to the bank, it’s necessary to sell GBP/USD in the $1.5785 zone stopping above $1.6000 and expecting the pair to drop to $1.5385.

Commerzbank: comments on EUR/USD Technical analysts at Commerzbank note that euro’s decline versus the greenback paused ahead of support provided by the level of 78.6% Fibonacci retracement in the $1.3380/60 area. The specialists think that EUR/USD will correct upwards rising to $1.3835/80. Then the bank expects the pair to resume decline moving down to $1.3270 (support line) and $1.3145 (October 4 minimum). Resistance is seen in the $1.4250/85 zone. The long-term target remains at $1.20.

Citigroup: scenarios for US dollar after the Supercommittee Analysts at Citigroup believe that investors’ attention that so far has been focused on the situation in the euro zone will turn next week to the United States where the so-called Supercommittee which consists of Democrats and Republicans is trying to reach a deal on deficit reduction. The specialists note that according to the survey they have conducted among investors, fewer than 20% of the respondents expect the committee to reach agreement on how to proceed with the cuts. It will be recalled that if the parties fail to agree, the nation will face automatic cuts. Citigroup economists are more optimistic. In their view, approaching election will urge the lawmakers to compromise. If these projections come true, Australian dollar will be able to make significant advance. Talking into account the fact that trading volumes will likely be small ahead of the Thanksgiving holiday on November 24, the bank thinks that AUD/USD could add 2-3% on the positive outcome. At the same time, the strategists warn that the odds are that the Supercommittee fails to come up with an agreement are rather high. In such case the greenback will get a 1-2% lift as a safe haven. The biggest gains of US currency will be seen versus euro and Canadian dollar. Specialists at RBC Capital Markets, however, don’t agree with the latter, they think that in the latter case US dollar will weaken as it did in July and August.

Commerzbank: euro’s recovery will soon be over The single currency is recovering versus the greenback: EUR/USD has managed to rise from the 5-week minimums in the $1.3420 area to the levels above $1.3500. Never the less, technical analysts at Commerzbank expect euro’s recovery to be short-lived. In their view, risk aversion will remain strong and the bears will use the opportunity to sell the European currency on its advance against its US counterpart. As a result, the bank recommends selling the pair in the $1.3650 zone. According to the specialists, resistance in the $1.3870/1.3900 area will cap EUR/USD for a long time from now.

Options market expects euro’s slump Wall Street Journal reports that 1-month risk-reversal indicator, which measures the weight of the bearish options bets on the single currency on the bullish ones, surged to 4 volatility points overcoming the level of 3.5 volatility points where it was seen at the peak of the financial crisis in 2008. That means that investors expect a sharp fall in EUR/USD during the next month. Analysts at ING underline that rising yields on European bonds stirs up the market’s concerns. Specialists at Brown Brothers Harriman think that euro will react to the growing concerns about France, Belgium, Austria and other core countries that threaten to take the sovereign debt crisis to a new level.

Euro area: comments from the policymakers AAA-rated European nations are beginning to express openly that they are against expanding rescue measures for the most indebted members of the currency union. Jyrki Katainen, Finnish Prime Minister thinks that the euro area is running out of options to solve the debt crisis. Italy and Greece should act on their own to convince the markets that they are able to reduce the debt burden. Katainen says that the second bailout deal for Greece adopted on October 26 didn’t manage to calm investors: since that time Italian 2-year bond yields surged by 150 basis points. Germany and Finland both oppose the creation of common euro bonds. France has openly called for the ECB to get more involved by issuing the European Financial Stability Facility (EFSF) a banking license that would allow it to refinance itself with the ECB liquidity operations. German Chancellor Angela Merkel criticized the proposition that the ECB has to become a lender of last resort. Reuters cites European and IMF officials who claim that the authorities discuss the possibility of the ECB lending money to the IMF, rather than any euro zone government that would help to get round the government restrictions. The IMF refused to release the next portion of its loan to Greece until the nation’s Prime Minister Lucas Papademos wins broad political support for austerity measures. Mario Monti, Italian Prime Minister pledged additional cuts to those targeted by Silvio Berlusconi. World Bank President Robert Zoellick claimed that the nations from China to the United Stets may be willing to support Europe through the IMF if the euro zone’s policy makers agree on a plan to stem their debt crisis.

Westpac: AUD/USD trading recommendations Technical analysts at Westpac expect AUD/USD to bounce to $1.0200. The specialists recommend selling Aussie on the rallies expecting the pair to drop to $0.9700. In their view, support at $0.9910 won’t be able to hold the bears.

Merkel proposed to change EU’s treaties German Chancellor Angela Merkel proposed today to change the EU's treaties making the European institutions able to intervene in national budgets in case deficit rules were breached. In her view, complaints should be brought to the European Court. Merkel thinks that the European Union needs greater integration. Here are some of Merkel’s comments (from Reuters): “I am convinced that only political solutions can resolve the situation… A breakthrough to a new Europe can only happen if we are ready to change our treaties.” “This can be limited to euro states, it can be done in the form of a protocol ... it would be a very limited change to the treaty”. “But national governments must be prepared to tie themselves to the community in a binding way.” “There are ... many good political and economic reasons to further integrate the 27-member EU, as opposed to the 17-member euro zone”.

Analysts are still negative on euro Spain’s borrowing costs rose to the maximal level since 1997 – the nation’s 10-year bond auction today has fueled concerns about the spreading of the European crisis to France and other core euro zone economies, such as the Netherlands and Finland. Short-term forecasts Morgan Stanley: negative outlook for the single currency. The specialists advise to sell euro targeting $1.31 lowering stops to $1.3580. UBS: if EUR/USD breaks below support at $1.3406, it will begin declining to $1.3346. Middle-term forecasts Nomura: euro will slip to $1.30 by the end of the year, so it’s recommended to sell EUR/SUD. Brown Brothers Harriman: the pair will finish 2011 at $1.29. Mizuho Corporate Bank: euro will fall to $1.30 by the year-end, trading will be very volatile. Citigroup: EUR/USD will decline to $1.31 by the end of 2011 and to $1.25 in the first half of 2012.

Capital Economics: the BoE will increase QE The Bank of England reduced its forecast for UK economic growth in 2012 from 2% to 1% claiming that British economy will suffer from the euro zone’s debt crisis. The central bank also slashed outlook for CPI growth rate claiming that by the end of the next year inflation will fall from the current 5% level below the 2% target. Economists say that although the BoE didn’t signal further easing the market now expects it to expand its QE program in 2011 by at least 50 billion from the current 275 billion pounds. Analysts at Capital Economics think that the central bank’s inflation report suggests that rates will stay on the minimal levels for the foreseeable future and that British economy will likely need even more loose monetary policy. The specialists think that even the revised forecast of the central bank seems to be too optimistic. In their view, Britain’s economy will stagnate in 2012. Capital Economics projects the 75 billion pounds of additional asset purchases in February but adds that if the economic data remains weak during the next 2 weeks, the BoE will have to announce extra support already in December. Analysts at Nomura expect the central bank to expand stimulus by 50 billion pounds in February and 25 billion pounds in May.

UBS about Spain-related risks Economists at UBS give 3 reasons to be concerned about Spain’s economic prospects: firstly, the high possibility that the country misses its deficit-reduction target, secondly, the risk of Spain’s falling into recession the next year and, thirdly, the precarious position of Spanish banks which will likely need more state money. Spanish Finance Ministry announced that the nation’s GDP will add 0.8% in 2011 failing to meet the 1.3% growth target. Spain’s economy stagnated in the third quarter. The country’s jobless rate is close to 23%. It’s too early to make predictions whether the deficit goal of 6% of GDP will be attained this year as the regions’ third-quarter budget data aren’t available yet. In 2010 Spain’s shortfall was equal to 9.3% of GDP. Spain faces general elections on Sunday, November 20. The ruling Socialist Party is likely to lose to the opposition People’s Party which pledges to meet the deficit goal of 4.4% of GDP in 2012. The 10-year Spanish bond yield rose to 6.4% for the first time since August. The specialists warn that the market’s rather optimistic attitude to Spain in comparison with Italy may change in the coming months or even weeks.

BoA Merrill Lynch: sell GBP/USD Currency strategists at Bank of America Merrill Lynch note that the euro zone’s debt turmoil that threatens recession has a negative impact on the situation in UK as about 30% of the nation’s exports go to Europe and only 10% to the United States. As a result, the specialists expect sterling to stay under pressure versus the greenback. The bank advises traders to sell GBP/USD in the $1.5800 area stopping above $1.6100. According to Merrill Lynch, in the near term the pair will slide to $1.54, while in the medium term it will be poised to hit $1.50. The analysts note that the chances that British pound will be a safe haven from the European crisis are low.

Danske Bank: yen will keep strengthening Analysts at Danske Bank expect Japanese yen to keep strengthening versus the greenback due to its safe haven status and Japan’s current account surplus. The specialists expect USD/JPY to renew the record minimum sliding to 75 yen in 3 months and to 74 yen in 6 months. In their view, loose monetary policy of the Federal Reserve is going to be more aggressive than the one of the Bank of Japan. As a result, yen’s appreciation will be interrupted only by the occasional interventions, but their effect will be short-lived.