The Annual 2011 Forex Forecast Part 3
In our opinion, the key problem of region consists in incompleteness of integration process. Having created a zone of euro and having cancelled native currencies, Europeans have stopped the halfway. The uniform debt eurobond market isn’t created, there is no coordination in fiscal policy (there is no plan on transition to the uniform consolidated budget), there are no effective bodies of general planning and the control. All these factors brake economic revival, undermine trust of investors which are forced to rush about between supranational currency of euro, national loans of reliable Germany and brave papers of Ireland with Greece.
Thus the last comments of representatives of EU say that now contradictions between “center” and “periphery” of Europe have only amplified. The unwillingness of Germany to consider a question on introduction of uniform bonds and the extension of the size of present fund of the financial help brightly confirms crisis of integration process.
As a result internal contention and separate problems of members of the currency unit will constrain in 2011 growth of the European currency. Under our forecasts, at each attempt of euro to rise above a mark of $1,40, in horizon “the ghost of debt crisis” at once will start to loom. As to lower bound of oscillations on steam the euro-dollar it, most possibly, will be allocated near to level of $1,20 (by the way, on counts approximately should cost euros at par purchasing capacity) so much. Breakthrough below the given mark, in our opinion, will be complicated as completely to concentrate on problems of Europe, having discarded the negative data arriving from the USA, at all desire of some participants, it will not be possible.
The softest monetary policy in the United States, together with long-term budgetary risks, won’t allow the American currency to become stronger excessively against euro forthcoming year. So, possible further steps of FRS on liquidity injection in economy (so-called QE3, QE4 etc.) which implementation we don’t eliminate, in 2011 can undermine again essentially dollar positions in a foreign market.
Besides the recent decision of the US president to prolong tax privileges for all categories of citizens and also to increase the period in which frames the unemployed have the right to manuals, will put additional pressure upon the budget and the size of a state debt. By estimates of some experts, only the decision on prolongation of privileges can increase the size of a public debt of the USA the next 10 years more than on $800 billion Thus within the next three years of the obligation of the American government should exceed the size of gross national product of the country. In absolute digits it is a question about $15 bln.
Thus, as we specified in our previous forecast, sooner or later the USA will be forced, as well as others “mortal”, seriously to take up the issue of a budgetary disbalance – otherwise long-term perspectives of dollar will be not the most iridescent.
Summarizing the aforesaid, we expect that the pair eurodollar next year will preferentially bargain in a range 1,20-1,40 dollars for euro. Thus more close by the end of the year euro quotations will aspire to range upper bound, and in I-II quarters of forthcoming year, on the contrary, it is possible to expect some correction on euro.
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