FX Week The global business of foreign exchange fxweek.com June 9 2008 v.19 n.23
Gain Capital topped this week’s one-month forecast
rankings by predicting a sideways environment with a
positive dollar bent in the main currency pairs over the
past few months.
“We are seeing some dichotomy in the euro and GBP
pairs relative to the dollar, a condition that basically
did not exist in the mid-to-latter stages of 2007,” said
Tim O’Sullivan, chief dealer at the online trading company
in New Jersey.
“Sterling is off approximately 8% from its high posting
in November 2007, while the euro is off only 3%,”
he said.
There are several current factors the company continues
to monitor. “The global equity markets continue
to be a key factor in assessing the direction of the dollar
versus the yen, as well as the direction of the yen
crosses,” O’Sullivan said.
He added that the international credit crisis has at
times put severe downward pressure on equity prices.
“This, in turn, has given rise to the buying of JPY as
investors take ‘risk plays’ off the table,” said O’Sullivan.
“At this stage, we are looking for this correlation with
the yen to continue.”
Additionally, the company is watching the performance
of the GPB relative to the euro. “Economic data
coming from the UK over the past several months is
painting a picture that is starting to resemble that of
the US, at least as far as the housing market is concerned,”
said O’Sullivan. “Meanwhile, within the
European Commission
the commitment
to containing inflation
remains the top
priority. So, what we
are faced with is the
prospect that the
Bank of England
could be forced to
reduce interest rates,
while the Commission
could be migrating
in a different
direction.”
Longer term, and for the next few quarters, Gain will
continue to focus on interest rates and central banks.
“The main driver for the past several years for the major
currency pairs has been interest rates,” said O’Sullivan.
“We feel that this trend will continue throughout the
balance of 2008 and into 2009.”
He added that the other focus longer term will be the
ongoing action taken by the central banks. The euro
has appreciated to a value that is causing concern not
only in Europe but also globally. “It will be interesting
to see how the central banks address the relative
strength of the euro,” said O’Sullivan. “It could be
that EU intervention, a tool not used for many years,
might come into play.” FX
Saima Farooqi
Gain Capital’s sideways glance pays off
Tim O’Sullivan, Gain Capital
© 2008 Incisive Media Investments. All rights reserved. Used by permission. First published in FX-Week June 9, 2008
://www.forex.com
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