PU: British pound and euro forecasted to endure for 2-3 months of decline versus the US dollar
Both the euro and pound sterling are today forecasted to feel the wrath of a strengthening US dollar for the next couple of months at least.
The British pound (Currency:GBP) and euro (Currency:EUR) have been tipped to come under multi-month pressures versus the US dollar by a number of prominent analysts.
The warnings come on a day that has witnessed a powerful performance by the world's reserve currency; at 14:45 on Friday we see:
The euro dollar exchange rate is currently 0.5 pct lower at 1.3030.
The pound dollar rate is 0.5 pct in the red at 1.5110.
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At least 2 months of GBP declines?
Stephen Gallo at BMO Capital Markets gives a stark warning concerning US dollar strength saying:
"We continue to see opportunities in EUR/USD and GBP/USD at these levels to position for 2-3-month USD strength. In the latest USD sell-off, both pairs interestingly displayed higher risk-adjusted returns to the upside than they did to the downside in the wake of Bernanke’s “hawkish” June 19th press conference.
"Given the “rates anchoring” the ECB and the BoE have engaged in, we think those risk-adjusted returns to the upside should have been smaller, but perhaps weren’t due to a positioning squeeze in the USD. That may leave us with an open opportunity for further downside corrective motions in those pairs as things develop."
Gallo's warnings come after a similar assessment made by Shaun Osborne at TD Securities who says:
"The broad USD bid is seeing the EUR and GBP giving back some of their strong gains from the past two days. As mentioned yesterday, we continue to think that between the FOMC minutes and Bernanke remarks on Wednesday, the world is little changed and the massive market reaction was overdone.
"That leaves us overall better buyers of the USD, and in our minds the moves since Wednesday have opened up selling opportunities for EUR/USD and GBP/USD."
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