Exchange Rate Forecasts

Exchange Rate Forecasts - March 2012

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Published on Friday, 10 February 2012 14:33

Written by Will Peters

Our latest call from Barclays Capital forecasts the euro to weaken going forward, largely thanks to the increased liquidity on offer in the eurozone.

Currencies with a close association to the US economy and the oil price should see their fortunes improve. Note though, that the US dollar itself is not necessarily likely to be boosted courtesy to its safe haven asset.






The February exchange rate forecast note from RBS shows that, "In the long term we expect sterling to appreciate against both the dollar and the euro towards fair value levels around 1.60 and 1.25-30 respectively."

That said, RBS warn that we are likely to  see continued volatility in coming months.

Risk sentiment remains fragile, illustrated by recent jitters over the Greek bailout package.

While the ECB’s liquidity operations have removed some of the stress from the Eurozone financial system, they have not provided a definitive solution to the debt crisis.

"We therefore expect to see risk aversion return in coming weeks which would clearly favour the dollar against both sterling and the euro. This should push EUR/USD back to 1.26 by the end of Q1 and to 1.24 in the middle of the year. GBP/USD meanwhile is seen trading in the low 1.50s," say RBS.

The banks says that this in turn leaves GBP/EUR hovering around the low 1.20s over the next couple of quarters, with short term moves higher or lower depending on news coming out of the Eurozone.