forex trading outlook today- bank of america forecast usd vs euro 2012 : Bank of America Merrill Lynch has sharply downgraded its core forecast for the euro versus the dollar as a result of a shifting macro outlook.
The bank has lowered its core EUR/USD forecast to $1.30 for the end of this year from $1.45. For the first quarter of 2012, the forecast is now $1.28 from $1.46 previously. The year-end 2012 forecast is now down to $1.40 from $1.50.
The analysts expect the EUR/USD to weaken further in the next three quarters, resulting in the downward projection revisions. The overarching concern is over the sovereign-debt crisis in Europe, with the situation in Greece posing the greatest challenge in the short term.
Coupled with this, growing concern about global growth has meant investors have unwound their Asian equities positions and several countries are trying to intervene to strengthen their currencies so demand for euros is drying up, said Paresh Upadhyaya, G-10 strategist and head of North America at Bank of America Merrill Lynch.
Also, the European Central Bank will likely cut rather than raise rates as previously expected and this could hurt the euro, he said.
The peripheral debt crisis could also intensify further. "The risks of a disorderly default by Greece are increasing," he said but did not provide a timeline for it. "The low growth outlook for Europe coupled with rising borrowing costs make Italy and Spain vulnerable to external shocks."
All the forces that had been supporting the euro "are losing steam or have reversed," the analysts wrote in a report released Wednesday.
"We keep our U-shaped EUR-USD projection path, but have pushed it forward, as we expect the Eurozone crisis and weakening growth to dominate expectations of further [Federal Reserve] quantitative easing and fiscal concerns in the U.S.," they note.
Although they expect Greece to receive more aid, bond prices and credit default swap spreads suggest "market concerns that a default is inevitable."
The enhanced bailout fund—the European Financial Stability Facility—"expected to be approved by the Eurozone parliaments by mid-October, is too small to address funding pressures in Italy, while any new Eurogroup initiative is not likely in the short term, unless a further deterioration in market conditions force it."
The bank has lowered its core EUR/USD forecast to $1.30 for the end of this year from $1.45. For the first quarter of 2012, the forecast is now $1.28 from $1.46 previously. The year-end 2012 forecast is now down to $1.40 from $1.50.
The analysts expect the EUR/USD to weaken further in the next three quarters, resulting in the downward projection revisions. The overarching concern is over the sovereign-debt crisis in Europe, with the situation in Greece posing the greatest challenge in the short term.
Coupled with this, growing concern about global growth has meant investors have unwound their Asian equities positions and several countries are trying to intervene to strengthen their currencies so demand for euros is drying up, said Paresh Upadhyaya, G-10 strategist and head of North America at Bank of America Merrill Lynch.
Also, the European Central Bank will likely cut rather than raise rates as previously expected and this could hurt the euro, he said.
The peripheral debt crisis could also intensify further. "The risks of a disorderly default by Greece are increasing," he said but did not provide a timeline for it. "The low growth outlook for Europe coupled with rising borrowing costs make Italy and Spain vulnerable to external shocks."
All the forces that had been supporting the euro "are losing steam or have reversed," the analysts wrote in a report released Wednesday.
"We keep our U-shaped EUR-USD projection path, but have pushed it forward, as we expect the Eurozone crisis and weakening growth to dominate expectations of further [Federal Reserve] quantitative easing and fiscal concerns in the U.S.," they note.
Although they expect Greece to receive more aid, bond prices and credit default swap spreads suggest "market concerns that a default is inevitable."
The enhanced bailout fund—the European Financial Stability Facility—"expected to be approved by the Eurozone parliaments by mid-October, is too small to address funding pressures in Italy, while any new Eurogroup initiative is not likely in the short term, unless a further deterioration in market conditions force it."
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