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Dollar outlook remains bearish

Wed, Oct 15 2008, 10:34 GMT
by Lloyds TSB Financial Markets Economic Research Team

Lloyds TSB Financial Markets


Market overview

Last week saw the end of an historic chapter in financial markets. With the equity markets in a climatic selling mode, the indications are for a medium term recovery for equities. However, it is unlikely to represent the end of the longer term bear market.

Given this scenario, a recovery in oil and soft commodities should be expected, although a short term range whilst the market forms a base can not be ruled out. This also suggests a recovery in the stricken emerging market currencies together with the core currencies which were most affected by the unfolding crisis.

As the decline in commodity prices, coupled with the drop in equities, magnified the drop in the high yielders, the reverse scenario should also be true. Given the sentiment change, the developing trends should be for further appreciation in the high yielders, together with a rally in sterling against the US dollar and euro.


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