FXstreet.com

Forex Currency Outlook

10

2

U.S. Dollar: Cyclical and structural forces in tug of war

Tue, Jun 9 2009, 08:54 GMT
by Economic and Strategy Team

National Bank of Canada


  • Standard & Poor’s downgrading of its credit rating outlook on the United Kingdom from stable to negative rattled the exchange markets and caused the fiscal sustainability of the principal advanced economies to be reassessed.
  • Normally, the desynchronization of U.S. and European monetary policies will push the greenback to gain at least 10% on the euro over a period of one year. In the next 12 to 18 months, the positive cyclical forces of the greenback should dominate the negative structural forces related to the worsening of the U.S. budget deficit.
  • For the first time in history, commodity prices are literally miles ahead of the actual state of the real economy. This, in turn, is driving up the cyclical currencies, including the Canadian dollar.
  • At present, the loonie exceeds its long-term equilibrium value by nearly 10%. However, unlike in October, the price of oil today is less than $70 a barrel and Canadian export levels are depressed. As the Bank of Canada cannot modify its position on quantitative easing, the loonie will depreciate only if the greenback appreciates across the board. In the end, if our forecast regarding the euro proves right, the loonie should come down a few cents from its current level.

Published on  Tue, Jun 9 2009, 08:58 GMT


Archive

National Bank of Canada  | 1100 University, 11th floor Montreal (Québec) H3B 2G7
http://www.nbc.ca/ | info@nbc.ca

Legal disclaimer and risk disclosure

This presentation may contain certain forward-looking statements about the 2009 Economic and Financial Outlook. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulatory developments, competition, technological change and economic conditions in Canada, North America or internationally. These and other factors should be considered carefully and readers should not rely unduly on National Bank of Canada’s forward-looking statements. This presentation may not be reproduced in whole or in part, or further distributed or published or referred to in any manner whatsoever, nor may the information, opinions or conclusions contained in it be referred to without in each case the prior express consent of National Bank.

Related reports

Timeframe Breakdowns - EURUSD / EURGBP / EURJPY / GBPUSD by Turtle Futures
Tue, Nov 24 2009, 09:19 GMT

London Bullion Report - Precious metals pause as concerns surface over economic recovery by The Bullion Desk
Tue, Nov 24 2009, 08:56 GMT

Daily World Market Update - Dollar's Day of Data; GDP, Consumer Confidence, Fed Minutes by World First UK Ltd
Tue, Nov 24 2009, 08:39 GMT

Today's Trading Signals by Financial Trend Analysis
Tue, Nov 24 2009, 08:37 GMT

Forex Analysis on Majors - Expecting Bullish Break in Euro by Forex Ltd
Tue, Nov 24 2009, 07:59 GMT

eurusd, highlighted, currencies

View All

Related content


Interested in forex trading? forex brokerage firms!


FX Solutions LLC
Contact the broker/FDM
Open a demo account
FOREX.com
Contact the broker/FDM
Open a demo account
Forex Capital Markets, LLC (FXCM)
Contact the broker/FDM
Open a demo account		GFT
Contact the broker/FDM
Open a demo account		Interbank FX, LLC
Contact the broker/FDM
Open a demo account

GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2009 "FXstreet.com. The Forex Market" All Rights Reserved.