Comments and forex-analytics from FBS Brokerage Company

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SNB meeting: results, comments, EUR/CHF

 

Swiss National Bank left today the left the floor for EUR/CHF at 1.20 and repeated to defend it will all efforts amid the pressure from the Swiss exporters to lift up this level (franc has been pegged to euro during already 3 months). The SNB has also left its key interest rate at 0%.

 

The SNB’s President Philipp Hildebrand claimed that the central bank is ready to act in case deflation risks emerge, though today deflation isn’t yet a danger for the Swiss economy. According to the SNB’s forecast, consumer prices will fall by 0.3% the next year, but we won’t see sustained decline in the general price level. Swiss central bank expects the nation’s GDP growth to slow from 1.5-2% this year to 0.5% in 2012.

 

Analysts’ comments

 

Credit Agricole: the SNB is going to stay on hold watching the dynamic of the economic indicators. In other words, the central bank won’t raise the limit for franc preferring verbal interventions. The pressure on Swiss exporters has eased a bit as franc has so far weakened versus US dollar.

 

Swissquote Bank, Capital Economics: as the situation in the euro area may deteriorate, the upward pressure on franc risks strengthening.

 

Goldman Sachs: the SNB is in a very difficult position due to the low inflation and poor economic growth.

 

Rabobank: the central bank is still likely to increase EUR/CHF floor. Swiss economy is affected by slowing economic growth of the euro area. Franc is overvalued and the deflation is at the door. The analysts advise buying euro on the dips.

 

UniCredit: SNB's growth and inflation forecasts don’t change much. If the central bank lifts the EUR/CHF floor to 1.25, that won’t be enough to help the exporters. If the SNB raises the limit to 1.30, it will face strong market’s pressure as well as the accusations of currency manipulation. As a result, the analysts expect the floor to stay at the current level. Swiss franc is seen slowly depreciating in 2012.

 

EUR/CHF

 

Bloomberg survey: EUR/CHF will trade in the 1.23 area in the first quarter of 2012 and then rise to 1.26 in the last 3 months of the next year.

 

Bayern LB: euro has upward potential against franc. If EUR/CHF manages to get above 1.2475, it will be able to climb to 1.26 even without any actions on the part of the SNB.

 

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Danske Bank: forecast for ECB and Fed’s rates

 

Analysts at Danske Bank think that at its next meeting in January the European Central Bank will reduce its benchmark rate by 25 basis points to 0.75%.

 

The specialists note that the euro area risks falling into recession during the next few months, the European policymakers still haven’t solved the crisis and the periphery bond yields remain high while the ECB is reluctant to extend its purchases of the European debt.

 

Danske claims that the outlook for US economy seems to be much better and expect American GDP to show decent growth in the coming quarters. As a result, the Federal Reserve is seen keeping the rates unchanged with the prospect of increase as the economic conditions improve.

 

So, make your conclusions.

 

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December 16: economic events and data releases

 

Events:

 

-Troika ends their 4-day visit to Greece.

 

Important data: US CPI (1:30 p.m. GMT).

 

Bond auctions: none (keep in mind, however, that France plans to sell 7 billion euro ($9.1 billion) of bills on December 19. Spain and Greece will also offer short-term government securities next week – these upcoming events weight on euro as the market seems pessimistic on the euro zone’s prospects).

 

Elsewhere in the world:

 

- The Reserve Bank of India announced measures to curb speculation in the foreign-exchange market (companies won’t be allowed to enter into multiple forward contracts to cover a single overseas transaction, the amount of open positions dealers can maintain overnight will be reduced). As a result, rupee climbed to more than 2 ½-year maximum.

 

- Russia joins the World Trade Organization. The world’s biggest energy exporter is set to receive the final approval to join the WTO after 18 years of negotiations. Joining the WTO should drive bigger investment inflows, trade and higher competition. It may improve Russia’s credit rating. (14:30 GMT).

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Danske Bank: outlook for 2012

 

Analysts at Danske Bank shared their expectations about global economic development in 2012. The specialists advance several assumptions:

 

- Concerns about recession are exaggerated – an overly negative economic and financial outlook is priced into financial assets;

 

- The world’s central banks will keep easing monetary policy;

 

- Euro zone crisis will continue, though the currency union won’t break up;

 

- Volatility will remain high;

 

- US dollar will experience structural weakness;

 

- Currency interventions will continue.

 

Danske give several arguments against euro zone’s break-up:

 

- It’s consequences would be worse than those of Lehman Brothers’ collapse;

 

- The costs of the break-up would be enormous both peripheral and core economies4

 

- The single currency is secured by political support as most of the member nations seem ready to give up more sovereignty.

 

The strategists, however, don’t rule out the possibility that the euro area may split, the exit would be very risky and potentially very costly for any country.

 

As for US dollar’s structural weakness, the analysts note that the greenback has been steadily depreciating during the last decade (with only a few interruptions like due to the introduction of the homeland investment act in 2005 and the global financial crisis in 2008). Among the reasons of such USD dynamics the specialists cite:

 

- Euro’s initial strong undervaluation versus the greenback;

 

- America’s persistent current account deficit;

 

- Rising commodity prices;

 

- On average easier monetary conditions.

 

In the absence of a global recession the dollar will lose to stronger currencies, such as Australian, New Zealand’s and Canadian dollars. The Dollar Index may decline in such case by about 4%, though not more as Danske isn’t bullish on riskier assets, but expects weak US fundamentals to drive a dollar depreciation trend in a “normal” risk environment.

 

As for EUR/USD, the analysts see the pair below $1.30 during the next few months until the market prices in new ECB monetary policy regime and then rebound end 2012 higher.

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December 19: new trading week starts

 

News:

 

The market became concerned about increased instability in North Korea as the nation’s leader Kim Jong-il died. His little-known third son, Kim Jong Un, is likely to succeed to the power that may cause tensions. As a result, save haven currencies strengthened.

ECB President Mario Draghi signaled in an interview to the Financial Times that the central bank won’t step up bond purchases to tame the sovereign debt crisis.

Bank of England released quarterly bulletin:

 

- disposable income of the households keeps declining due to the austerity measures;

 

- assessment of financial markets pointed to worsening conditions due to the euro zone's debt crisis;

 

- Chief Economist Spencer Dale wrote that the recovery “has been disappointing and there are signs that output growth has slowed in recent months”.

 

Data:

 

New Zealand’s consumer confidence declined from 112 in the third quarter to 101 in the final 3 months of the year.

Commodity Futures Trading Commission: futures traders increased net bearish bets on EUR/USD from 95,814 to 116,457 in the five-day period ended December 13.

 

Market’s talk:

 

Market's expecting Standard & Poor's to downgrade France sometime this week. On Friday, December 16 Fitch Ratings lowered its outlook for France’s AAA credit rating from stable to negative.

 

Watch today:

 

French debt auction: the nation plans to sell 7 billion euro ($9.1 billion) of bills.

Bloomberg reports citing the unnamed officials that European finance ministers will hold a conference call today to discuss funding of the euro zone’s indebted nations through the IMF.

Draghi is speaking in Brussels at 3:30 p.m. GMT.

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Ichimoku. Weekly forecast. GBP/USD

 

Weekly GBP/USD

 

British pound keeps gradually moving down versus its US counterpart though it still managed to hold above November lows.

 

Tenkan-sen and Kijun-sen are going sideways (1, 2), while bearish Ichimoku Cloud retains its side (4) – the signs that the consolidation is likely to continue.

 

On the upside, sterling is capped by the strong resistance provided by the Turning line (1), the Standard line (2) and Senkou Span “B” (3). On the downside, the prices are supported by November and October minimums.

 

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Daily GBP/USD

 

At the beginning of the last week GBP/USD breached Tenkan-sen (1) and consolidated below this line which is currently action as a resistance.

 

It’s necessary to note that here as well as on the weekly chart the Turning and the Standard lines (1, 2) are horizontal that means the trend is flat.

 

The Ichimoku Cloud has so far rather often changed its mode and is thin so that it can’t be viewed as a serious obstacle, though to get to Kumo the prices will need to overcome Tenkan-sen (1) and Kijun-sen (2). In addition, descending Cloud has recently begun widening showing that the bears become stronger.

 

Pound’s likely to stay below Tenkan-sen.

 

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Ichimoku. Weekly forecast. USD/JPY

 

Weekly USD/JPY

 

The pair USD/JPY is consolidating inside Tenkan_Kijun channel: the Turning line acts as support (1), while the Standard line from which the prices have been staying away since March provided resistance (2).

 

It’s difficult not to note that the pair is stuck in the narrow range. The position of the lines on the chart doesn’t change much: Tenkan-sen (1) and Kijun-sen (2) are horizontal, the descending Cloud retains its size (3, 4).

 

The fact that the greenback has been able to stay above Tenkan-sen means that the position of bulls is slowly but surely strengthening. The outlook for the pair will significantly improve, when the US currency will finally manage to overcome Kijun-sen (2).

 

One would be able to speak about the pair’s future with more certainty in a few weeks when the lagging Chinkou Span, which is marked green on the chart, approached the price chart. In the near future the pair will keep trading sideways.

 

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Daily USD/JPY

 

On the daily chart the prices were holding above Tenkan-sen during the entire last week (2) – the Turning line has so far provided the pair good support. In addition, a bit lower stays Kijun-sen (1) which will also help to hold bears if they strengthen. The extremely thin Cloud itself (3) is unlikely to be much of a support.

 

Neither bulls, nor bears have enough strength to change the situation to their profit: Kumo is till almost a line.

 

The Standard line (1) keeps moving horizontally, so the general sideways trend isn’t over and won’t be at least until the end of the month.

 

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Ichimoku. Weekly forecast. USD/CHF

 

Weekly USD/CHF

 

There are no surprises on the USD/CHF chart: the prices are still inside the Cloud, while the bulls are patiently trying to overcome this obstacle. It’s quite likely that in a few weeks Kumo will be left behind.

 

The lines Tenkan-sen (1) and Kijun-sen (2) climbed a bit higher and then once again turned horizontal. The pair is supported by the Turning line (1) and Senkou Span A (4). The Ichimoku Cloud, which has so far switched upwards, isn’t wide, though stable (3). Tenkan-sen (1) and Kijun-sen (2) are holding weak, but still “golden cross”.

 

It’s necessary to note that the prices managed to get above resistance provided by October maximums. The next target of the bulls is Senkou Span B (5).

 

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Daily USD/CHF

 

On the daily chart one may see that last week the greenback managed to set a new high, but then it slid lower, though is still trading above October highs.

 

The pair USD/CHF is testing support provided by the Turning line (1). The next support for US currency will be the Standard line (2).

 

Strong “golden cross” (3) remains in place, rising Ichimoku Cloud is widening (4), while the lagging Chinkou Span (5) finds itself above the price chart – the bullish signal.

 

Taking into account the horizontal state of Tenkan-sen (1) and Kijun-sen (2), it’s possible to expect some consolidation of the pair. The general technical picture is still positive.

 

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December 20: news and data to watch

 

News:

 

RBA meeting minutes (full text here):

 

-comments are less dovish than expected;

 

-Australian economy will keep expanding even though euro zone’s debt crisis has a negative impact on the global economic growth.

 

So, RBA rate cuts in the near future are unlikely. Australian dollar has managed to gain a bit on the news rising from $0.9890 to $0.9950.

 

UK consumer confidence improved in November (40 vs. 36 in October).

 

Watch today:

 

Germany: Ifo Business Climate (decline is expected);

Spain: 3- and 6-month bills auction;

The ECB begins longer-term refinancing operation (LTRO) in which banks can borrow unlimited funds in return for eligible collateral, including euro-region government bonds. The banks will be able to decide what to do with the funds on their own.

 

The single currency may find some support in the short term as the LTRO may provide a new source of demand by banks for euro-zone sovereign debt.

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BofA: sell EUR/USD on the rallies

 

Technical analysts at Bank of America believe that the single currency may fall to 1-year minimum versus the greenback at $1.2510 (last visited in July 2010).

 

The specialists make such forecast as on December 14EUR/USD went below October minimum at $1.3145 sliding to $1.2945. In their view, support in the $1.2901/2859 area will be the last obstacle ahead of $1.2533.

 

In their view, the pair is with no doubts trading within the downtrend. The analysts note that as the market's sentiment about euro is extremely bearish, short squeezes are possible and the pair has chances to rise to $1.3250. At that point Bank of America recommends opening short positions.

 

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NAB: forecast for AUD/USD in 2012

 

Analysts at National Australia Bank believe that Australian dollar will be fluctuating in 2012 between $0.9000 and $1.0500 versus its US counterpart.

 

The specialists note that the pair AUD/USD, which has set this year’s maximum at $1.10 on July 27, will be capped by this level during the next year.

 

According to the bank, in the first quarter of 2012 Aussie will drop to the $0.9600 zone as the global growth prospects deteriorate and then stay around parity in the second half of the next year. In the worst case, if some European nation defaults and the euro zone falls into recession making the global economy contract as well, AUS/USD will drop to $0.8500.

 

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BBH: euro will decline to $1.24

 

Analysts at Brown Brothers Harriman expect the single currency to decline versus the greenback in the coming months to end the first 3 months of the next year at $1.24.

 

The specialists note that euro is still overvalued as its fair value is in the $1.20 zone. The fact that EUR/USD was trading rather high may be explained by the repatriation and the ongoing diversification of reserve inflows which supported the European currency. At the same time, BBH says that these processes may slow down euro’s slump, but won’t stop it.

 

According to the bank, the pair will find itself under pressure due to the euro area’s economic weakness amid tough austerity measures and the tensions at the peripheral band markets. Such outlook increases euro risk premium and the possibility of further rates cuts by the ECB.

 

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GBP/USD: MPC minutes and technical comments

 

Bank of England Monetary Policy Committee members voted unanimously at their December meeting to keep policy unchanged as uncertainty over the economic outlook remained high.

 

All nine members of the MPC voted to continue with the current 275 billion pounds of asset purchases and to leave the benchmark interest at 0.5%. Divisions on the MPC remained over the outlook, with some members saying the November Inflation Report projections meant more quantitative easing was likely to be needed.

 

UK Borrowing turned out to be lower than expected in November: 18.1 billion pounds versus the forecast of 19.6 billion.

 

Although UK central bank left door open for more easing in February, pound strengthened versus the greenback. GBP/USD tested the levels in the $1.5773 zone. Support for British currency is situated at $1.5650. Watch the bullish “double bottom” pattern: it will be confirmed if sterling overcomes resistance in the $1.5768/77 area.

 

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ECB conducted first 3-year LTRO, analysts’ comments

 

The ECB has reported a strong demand for its 3-year longer term refinancing operation allotment. The central bank lend more than 489 billion euro to 523 financial institutions at the fixed rate of 1% and to be paid January 2015. The analysts were expecting the amount of about 300 billion euro.

 

It was the first of the two 3-year loan auctions announced ECB president Mario Draghi at the central bank’s last meeting on December 8. The next one will be allotted on 29 February 2012.

 

Reuters sited the following analysts’ comments:

 

Societe Generale: “This is good. It's a positive number, at the top end of expectations. You have to regard it as a positive result. This is at least a solid 240 billion euro (net) increase for banks. But it is still short of covering all of the banks' financing for next year. So, it could ease fears of a credit crunch somewhat.”

 

ING: “…the lower number of participating banks (523 versus 1121 previously) suggests that the take-up is currently less widespread — and probably more concentrated in banking systems in peripheral euro zone countries. We will be keeping a close eye on national central bank data over the next few weeks for further clues on which countries' banking systems tapped the three-year facility.”

 

Analysts at UBS claim that though the LTRO will provide breathing space for banks it won't improve the long-term outlook for the European financial sector.

 

The pair EUR/USD climbed to the weekly maximum in the $1.3200 area on the ECB’s announcement before sliding back to $1.3090.

 

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Japan: monetary policy and efforts to stem yen

 

Bank of Japan: monetary policy unchanged

 

The Bank of Japan kept monetary settings unchanged at today’s meeting, but cut its economic assessment saying that the nation’s GDP growth will stagnate at least until spring next year. Japan's economy recovered from a recession triggered by the March earthquake but is expected to slow sharply in the fourth quarter as the initial rebound driven by companies restoring supply chains and production facilities dies out and the overseas demand decreases.

 

BOJ Governor Masaaki Shirakawa underlined that the euro zone’s debt crisis and economic weakness have negative impact on the global economy in general and on Japan in particular.

 

The central bank left the key interest rate below 0.1%. The BOJ didn’t increase asset purchases after 2 months of doing so, trying to save this option for future action.

 

Analysts at Nomura expect more easing in January-March referring to the risk of a credit rating downgrade for European sovereign debt and the possibility of more stimulus from the Fed and the ECB.

 

Japan’s government: intervention fund increased

 

Yesterday Japanese government decided to boost its currency market intervention fund by 30 trillion yen ($385 billion) from 165 to 195 trillion yen – that’s the second biggest* increase and the sign that Japan’s officials are keen to prevent sharp advances of the national currency. Finance Minister Jun Azumi announced that Japan is ready to act at any moment if necessary.

 

The increase was included in a fourth extra budget approved by the government Tuesday. The extra budget is aimed to revive Japanese economy and will be submitted to the regular parliamentary session starting January along with a main budget for the next fiscal year.

 

Japanese authorities had to lift up the intervention fund as they spent 9.092 trillion yen between October 28 and November 28 trying to stem yen’s appreciation and support exporters, so it was needed to replenish it.

 

Japanese government kept its economic assessment intact in its monthly report issued on Wednesday but cut its view on business sentiment, reflecting worsening confidence among big manufacturers in the BOJ's December Tankan survey.

 

*The biggest one was 40-trillion increase in 2004 fiscal year which was conducted after yen-selling intervention campaign of 2003-2004.

 

According to the estimates of Barclays Capital, the actual amount available to the central bank for selling yen may increase from about 40 to 70 trillion yen. The analysts say that taking into account the general strengthening of US dollar seen so far and better economic data, the intervention fund will be able to satisfy the need for selling yen during several months.

 

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Europe: event to watch today

 

- Italy's government will hold confidence vote on austerity in Senate around 2 p.m. GMT: the lawmakers are set to give final approval today to Prime Minister Mario Monti’s 30 billion-euro ($39 billion) emergency budget plan, including a pension overhaul and a levy on primary residences.

 

The draconian austerity measures will affect the nation’s weak economy. Data released yesterday showed that Italy’s GDP shrank contracted by 0.2% in the third quarter after 0.3% growth in the previous 3 months. The government forecasts contraction in the fourth quarter, 0.6% growth in 2011 and a 0.4% contraction in 2012.

 

- European Central Bank President Mario Draghi speaks today in Frankfurt after a meeting of the European Systemic Risk Board which begins at 4 p.m. GMT.

 

Yesterday the ECB made the region’s banking sector a Christmas present – the central bank lend a record sum of 489 billion euro ($638 billion) to 523 euro-area banks in 3-year loans. That was the first of ECB’s LTROs announced on December 8. The second one will be allotted on February 29, 2012. According to Goldman Sachs, the borrowings equal about 63% of the European bank debt maturing in 2012.

 

The majority of analysts argue that the ECB’s move won’t be efficient as the region’s banks can decide on their own where to invest the obtained funds and they aren’t very likely to invest in the peripheral debt.

 

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St. George: 2012 forecast for AUD/USD

 

Analysts at St. George believe that although Australian dollar will be affected in 2012 by the euro zone’s problems and potential slowdown in China, it will fall, but not much.

 

The specialists note that Aussie has shown greater resilience during bouts of risk aversion this year in comparison to previous episodes of risk aversion due to its strong underlying fundamentals.

 

The bank expects AUD/USD to trade around $1.0000 in March, in the $0.9900 area in June and near $1.0100 at the end of 2012.

 

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Japan: government revised economic forecasts

 

Japanese government reduced forecast for the nation’s real GDP growth in 2012 fiscal year which begins in April from 2.7%-2.9% to 2.2% (y/y). The estimate of this year’s growth were lowered from +0.5% to -0.1%.

 

As the reason of the revision the officials cited negative impact of the yen's appreciation and the ongoing sovereign debt crisis in the euro area. At the same time, the next fiscal year Japan’s economy is expected to “recover moderately” on the assumption that the global situation starts improving.

 

Consumer prices will add 0.1% in fiscal 2012 (y/y) after showing declines in the previous three years, says the government. In fiscal 2011 CPI will drop by 0.2% (previous forecast was the 0.2% rise).

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Citigroup: warning for USD bulls

 

Currency strategists at Citigroup say that US economic data has so far been surprising the markets in a positive way referring to the recent labor, housing and trade figures. As a result, the Economic Surprise Index designed by the bank has risen from the record minimum in June almost reaching the record maximum at present.

 

According to Citigroup’s experience, the upside moves of the index correspond to US dollar’s selling periods. It happens as the market becomes more optimistic and risk sentiment improves making the demand for US currency decline.

 

The analysts don’t think that dollar will weaken this year as many traders have already closed their books for the year and others may be reluctant to take on big new positions right before the end of a quarter. At the beginning of 2012, however, if the economic data remains favorable, investors may decide that they have overestimated the negative effects of the euro zone’s crisis on the global economy. “The surge in data flow itself may be insufficient to reverse recent risk aversion, but it does suggest that dollar’s weakness could reassert itself more quickly and forcefully than many anticipate once conditions settle down,” says the bank.

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Analysts expect Aussie to weaken early in 2012

 

Analysts at Commonwealth Bank have so far lowered forecast for AUD/USD to $0.9800 by March 2012 and to $0.9500 by June 2012.

 

Reasons:

— general strength of US dollar due to improved US economic data (opposite views to Citigroup);

 

- funding demand for the US dollar in response to Basel III capital requirement;

 

- central banks slow down their diversification efforts out of US dollar into euro as the European debt problems persist.

 

Strategists at TD Securities expect Aussie to slide to $0.9500 by the end of the first half of 2012.

 

Reasons:

 

- slowing growth in the global economy with the deep recession in the euro zone and the United States;

 

-China’s economic slowdown.

 

Westpac economists think that AUD/USD will rise to $1.0200 in the near term as it’s supported by foreign direct investment inflows. Never the less, Aussie has been trading above its fair value in the $0.91 area for a long time and the odds are that it will depreciate.

 

Analysts at National Australia Bank also claim that Australian currency will end December at $1.0200, then drop to $0.9600 by March before rising gradually to $0.9800 by June and then to parity by September.

 

Barclays thinks that AUD/USD will weaken to $0.9800 by the first quarter and then rise to $1.0100 by June. In the short term Aussie will stay under pressure as the euro zone governments failed to commit to faster fiscal consolidation and the ECB refused to extend bond purchases. In the medium term, however, the bank retains a constructive view due to many factors including limited impact on Australia's macro fundamentals from deteriorating euro zone’s growth, expectations of more easing from China, stability in local-currency commodity prices which are helped by weaker currencies.

 

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UniCredit: forecasts for EUR/USD and GBP/USD

 

EUR/USD: the single currency will keep weakening in the first quarter of 2012. The pair may slide to $1.25. If the tensions at the market ease, euro will be able to rebound, though sustainable rally seems unlikely.

 

GBP/USD: British pound may decline versus the greenback in the first half of the next year as US currency will keep enjoying strong demand, while the bank of England will continue asset purchases. In the second part of 2012 the outlook for pound is less negative, though UK economic growth will remain sluggish. As a result, the pair GBP/USD will be capped by the levels in the $1.60 area.

 

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The FOMC will become dovish the next year

 

The Federal Open Market Committee is expected to become more dovish due to the annual rotation. As a result, the Federal Reserve Chairman Ben Bernanke will get chance to pursue his active loose monetary policy if he thinks that American economy needs help.

 

The FOMC consists of 12 members – 7 Fed board governors and the president of the New York Federal Reserve Bank have – permanent vote, while the 4 remaining seats are shared by the other 11 FRB presidents which change places on the annual basis.

 

This year 3 out of the 4 rotating seats was occupied by the hawks – Richard Fisher, the president of the Dallas Federal Reserve Bank, Charles Plosser of Philadelphia, Narayana Kocherlakota of Minneapolis. That means that these policymakers don’t think that monetary policy can be used to stabilize economic conditions and would prefer setting long-term target for inflation. Doves, on the other hand, believe that the central bank has to keep interest rates low to support the national economy. Fisher, Plosser and Kocherlakota voted against the pledge to keep short-term rates close to 0 until the middle of 2013 and against the Operation Twist.

 

The old distinction, with hawks concerned about inflation and doves worried about weak growth, has subsided over the past 20 years. Fed officials agree that keeping inflation low and stable is a necessary precondition of good economic performance.

 

This year, a “tough group” of hawks occupied. These officials had little sympathy for the Fed’s innovative efforts to try to lower long-term interest rates, said Brian Bethune, a Fed expert at Amherst College in Massachusetts.

 

In 2012, the Fed is losing 3 hawks and only getting one: Jeffrey Lacker, the president of the Richmond Fed. The other 3 new members: John Williams, the president of the San Francisco Fed, Dennis Lockhart, the president of the Atlanta Fed, Sandra Pianalto of Cleveland are viewed as more consensus-minded and likely to vote with Bernanke.

 

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BBH: demand for yen will remain high next year

 

Analysts at Brown Brothers Harriman believe that in the first quarter of 2012 the demand for Japanese yen will remain high.

 

In their view, yen will remain among the top performers in the G10 in the first quarter of the next year due to such factors as:

 

- demand for safe havens;

 

- Japan’s inability to recycle its current account surplus.

 

According to BBH, the Bank of Japan could conduct new currency interventions. At the same time, the specialists don’t expect the BOJ to establish a definitive floor in the USD/JPY.

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BMO: 2012 forecast for Canadian dollar

 

Analysts at BMO Capital Markets say that Canadian dollar has been influenced by 2 things:

- investors' risk sentiment;

- outlook for Bank of Canada’s policy.

The specialists think that Canadian dollar will weaken versus its US counterpart. In their view, the pair USD/CAD will rise to 1.0600 in the first half of the next year as the market will be dominated by the risk aversion and significant possibility of BoC rate cuts.

In the second part of 2012 risk sentiment will improve and prospects for BoC rate hikes mount, so that loonie will likely get chance to reverse and USD/CAD will slide to the parity level.

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Raiffeisen: 2012 prospects for EUR/USD

 

Analysts at Raiffeisen think that the single currency will fall versus US dollar in the first quarter of the next year below $1.30, staying around this level by the middle of 2012.

 

Then EUR/USD will rise and its average rate in the second half of the year will be at $1.35.

 

The specialists say that the exchange rate will likely overshoot or undershoot the targets by up to 10 cents in between due to renewed escalation in the euro-zone debt crisis and/or further Fed’s monetary policy easing. In their view, these deviations from the path of the interest rate differential will be only temporary and offer good trading opportunities.