Research (Investicniweb.cz)
Currencies  |  September 20, 2012 08:16:21

Anders Lumholtz: Euro has room to strengthen



After the recent aggressive actions of central banks in America and Europe, the euro has strengthened considerably. Its potential is far from exhausted it though. The dollar now presumably awaiting slump, not only against the common European currency. Ever since the end of the year it may be all very different, says strategist at Danske Bank Anders Lumholtz. He adds that investors may now be interesting to carry trades currencies with liquid and not very dependent on politicians currencies.

The ECB will buy bonds troubled eurozone countries. Europe is nearing an agreement on the form of a bank union and working on other for pre-steps. We are witnessing a rebound?

Anders Lumholtz (AL): The threat that the eurozone falls apart over the summer smaller. This confirmed the recent decision by the ECB to buy bonds, and green, which last week gave the German Constitutional Court ESM, the European protective Wall. Even so, there are still risk factors. We are concerned in particular, how long and deep the recession will be Spanish. Likewise, we will closely monitor the elections in Italy. Because of these and other risks is needed to political leaders in key EU countries continue to openly express support for the euro. Otherwise, it would be very difficult to convince people that the common currency is the right way forward.

European politicians in September sent some positive signals, the most important thing, however, came from central bankers. What about their recent pledge to buy bonds mean for the euro?

AL: OMT program presented by the European Central Bank to me is for the euro very good news. To do this, add that the expected bond purchases not get rates on money markets under pressure because they have to be fully sterilized. Investors who hold assets denominated in euro, should therefore henceforth should sleep a little better.

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  • Given the situation in Europe and beyond are you waiting for, that the euro will strengthen against other major currencies?

    AL: The recovery of the euro, we have witnessed in recent times, it is very steep. EURUSD pair so already significantly exceeded 1.27 - maximum three-month interval, which we set up in mid-August. Still, the biggest jump around all the time before us. After the Fed announced its latest action, the euro-dollar rate was above 1.30. And given that the Fed what he did, basically changed the rules of the game, we can expect a further weakening of the dollar - against both the euro and the cyclical, commodity-dependent currencies. As the euro is concerned, therefore, we see the possibility of short-term reinforcement, as we are not convinced that it will end the year stronger. And because of the fiscal cliff in the Americas and the possibility that the ECB will cut rates further.

    What other factors are currently necessary to take into account in the case of the euro?

    AL: Maybe a combination of monetary easing in the U.S., waiting by the ECB and a kind of calming the global economy for the euro would certainly be very good news. Investors euro recently believed too, which means that there is a potential for growth. U.S. presidential elections and fiscal cliff, or significant belt-tightening, which, because it is waiting since January, it seems to be for currencies other than the dollar negative. Due to the fact that the U.S. dollar is the global reserve currency, we expect equity markets go due to the actions related to the fiscal cliff down, the dollar could strengthen the contrary.

    What strategy at this time was supposed to choose a Forex Lumboltze choose a small investor?

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    Anders Lumholtz: Euro má prostor k posílení

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