Forex Go!

Currency strategists at Danske Bank claim that although the single currency was under strong pressure during the past month, future dynamic of the currency markets will be determined primarily by the interest rate differential that are in favor of euro versus the greenback.

The specialists think that the European authorities won’t support the idea of early Greek debt restructuring and this will help to constrain investors’ concerns. In addition, according to Danske, Greece’s debt problems won’t keep the ECB from lifting up the interest rates. Danske expects the next hike to come in July. As for the greenback, the economists think that it’s going to stay weak as the Federal Reserve has no intention to raise the borrowing costs.

However, the elevated risk premium made the specialists revise downwards the forecast for the pair EUR/USD: 3-month forecast – from 1.50 to 1.48, 6- and 12-month forecasts from 1.50 and 1.40 to 1.46 and 1.38. In the second half of the year US currency will get more support as the Fed’s QE2 program expires in June.

Chart. Daily EUR\/USD

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