Friday, February 25, 2011

Morgan Stanley, Citigroup & Sumitomo Mitsui on the Euro/Dollar

Morgan Stanley: upward revision of euro forecast - 25 February, 2011

Analysts at Morgan Stanley increased their forecasts for the European currency versus US dollar and Japanese yen.

As the reason for the forecast revision the specialists named more hawkish comments that keep coming from the European central bank. The ECB officials have spoken so far about the necessity to tighten monetary policy in order to fight rising inflation. In addition, the bank underlines that the European authorities have shown more efforts to solve the euro area’s debt problems and managed to reduce the risk of the region’s contagion.

Morgan Stanley changed target for the pair EUR/USD from $1.25 to $1.32 by March 31 and raised euro forecast from $1.20 to $1.24 by the end of the year. The pair EUR/JPY will trade at 111 yen at the end of March, while the previous estimate was at 108 yen. The year-end target for euro against yen was switched from 112 to 115 yen.

It’s also important to note that the economists reduced their March-end prediction for the pair USD/JPY from 86 to 84 yen keeping the year-end forecast at 93 yen.

Citigroup: EUR/USD will rise to 1.4283 - 25 February, 2011

Technical analysts at Citigroup claim that the single currency may rise above 1.4000 versus the greenback after it formed the reverse “head-and-shoulders” pattern that consists of 3 bottoms with the deepest in the middle.

The figure began on February 2.

According to Citigroup, the pair EUR/USD may climb to 1.4030 and 1.4283.

The specialists note that the expectations of the ECB’s rate hike made the market players reconsider their previous bearish sentiment of euro.

Sumitomo Mitsui: euro may climb to $1.4200 - 25 February, 2011

Currency strategists at Sumitomo Mitsui Banking Corporation believe that the single currency may keep gaining in the next few weeks.

The specialists expect that the oil prices will remain very strong due to the tensions in the Middle East driving euro’s rate up as inflation in the euro area will increase encouraging the expectations that the European Central Bank will lift up interest rates.

Of course the inflationary pressure in the United States will strengthen as well. The analysts, however, think that the Fed will fall behind the ECB in the monetary tightening as higher oil prices could have a very negative impact on the American economy and the US monetary authorities will remain keen on the stimulus policy to support the country’s economic rebound. In addition, there are the political concerns affecting the greenback: investors are worrying that the popular protests against pro-US governments in countries like Egypt and Saudi Arabia signal that US global power is waning.

According to Sumitomo Mitsui, the pair EUR/USD may climb above 1.4150 and, possibly, even above 1.4200.

writed by FBS Holdings © 2011
posted by Forex Quebec

February 25, 2011