On January 14, 2013, CNBC predicted that this year would see a currency war between nations, with more and more countries resorting to devaluing their currency in an attempt to stimulate their economies. Most of us involved in the Forex market use some form of Forex software to make trading decisions. However, an informed decision can only be made when we have some reason to expect what is expected on the market. Therefore, this article tries to combine the different currency forecasts that economists make for 2013.
Currency Trends You Should Pay Attention To Before Using Forex Software
Several Forex experts predict that 2013 will be a period of events for major currencies. Some predict that although the USD, GBP and JPY will weaken, commodity currencies are likely to strengthen by the second half of the year. The monetary policies of the ECB and the Federal Reserve also suggest that there may be an increase in EUR / USD. Current forecasts suggest a more positive outlook for US growth than the euro area. Let’s look at what is expected for major currencies:
- The US dollar (USD) – USD is likely to be affected by labor market and housing developments, the Fed’s monetary policy and the result of the “fiscal scale”. The foreign exchange market expects improvement in the labor and housing segments. On the other hand, the Fed may need to review its monetary policy once the effects of the “fiscal scale” become apparent. Watch out for developments related to cost reduction and the debt ceiling.
- Euro (EUR) – Although positive sentiment is still linked to this single currency, unless there are some indications of economic growth in the region, positivity may not last long. Investors must also watch for a potential bailout if Spain fails to sell 20 billion euros to Bonos. International bailouts could upset the precarious balance in the eurozone observed at the end of 2012.
- British pound sterling (GBP) – While the UK economy continues to struggle with a slow economy, its central bank is not yet considering a quantitative easing initiative. However, some rumors about the possibility of a QE program in early 2013 have been circulating recently. If the Bank of England implements such a scheme, it is likely that the foreign exchange market will see a sell-off of GBP.
- Japanese Yen (JPY) – There is speculation that the JPY will weaken against the US dollar in 2013, falling by at least about 10%. The Shinzo Abe government and the new BoJ manager (to be announced in April 2013) are expected to devalue the JPY. However, if the eurozone environment deteriorates, both USD and JPY could prove secure asylum deals.
- Swiss Franc (CHF) – One of the main factors that will affect the CHF is whether the Swiss National Bank removes its EUR / CHF commitment from 1.20000. The Swiss will have to reconsider its value either if the CHF is restored to safe haven status or if the EUR / CHF pair starts to rise.
Forecasts for winning deals in 2013
Here is our attitude to Forex trading for the year:
- USD / CAD – Even the most conservative estimate pegs CAD at 0.9600 against the US dollar, with only a handful of analysts predicting parity in 2013. Any price above parity would be a good opportunity to sell USD and buy CAD.
- GBP / USD – Analysts are currently divided on the direction in which the GBP may take in 2013 against the USD. If the BoE introduces a QE program, the GBP will strengthen, although the rise is likely to remain below 1.64.
- EUR / CAD – As CAD is expected to strengthen in 2013, many analysts recommend selling EUR and buying CAD this year.