The US Federal Reserve rate cut yesterday was more than I anticipated. With the possibility of further rate cuts, very limited now, and also the possibility of bailouts not likely to happen, the USD currency will be totally market driven.
Meanwhile, the Euro has recovered 40 percent from its drop against the USD, which went from 1.66 to 1.22. In the next couple of days, if the Euro goes higher, around 1.42 to 1.46, then the previous bottom of 1.22 can be treated as a final bottom and the likelihood that Euro would go to 1.18, as I wrote in my earlier reports, becomes unlikely.
New measures are only likely to happen next year, once Mr. Barack Obama assumes office. For now, the auto sector and the credit situation remain the main focus.
Currencies:
Euro might still move higher against the USD to 1.4230. GBP for the moment is very bullish and is likely to move to 1.6550, against the USD.
Gold: Target is 875 for this year.
Oil: Likely to remain below the USD 45 level with USD 30 being the target, per barrel.
EUR/PLN-USD/PLN: Both these currency pairs should have been stronger than their current levels, however, for some reason they have not appreciated as much as the EUR/USD or the GBP/USD. I would expect the PLN to get a bit stronger.
The automotive sector is the main focus. If not assisted financially, the auto sector could immensely worsen the job situation. The current 5.8 percent unemployment level in the US is still better than most other G7 economies. However, if the auto sector is let go, then this could mean another 1 to 2.5 million job losses over the next couple of months. Keeping in view that Germany and France have been managing with unemployment levels between 8 to 12 percent in the last couple of years, I think US could manage that as well. I do not see this as a gloom-doom situation. Further, the credit situation still needs to be controlled, which at the moment is more important and a weak dollar would help.
If you have any questions, you may contact Madan Sharma directly through email.
Disclaimer: Any opinions, news, research, analyses, prices, or other information provided by the author are provided as general market commentary, and do not constitute investment advice. Neither IFB nor the author is liable for any loss or damages, including without limitation, any loss of profit which may arise directly or indirectly from use of or reliance on such information. Investors are advised to consult their broker before making a decision on buying or selling a particular security, product or currency pair. These articles are opinions and should be treated as such.
Thursday, February 9th, 2012
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