Market Watch 2009

Posted 06 January 2009 at 15:02

Posted in Currency Exchange

Accurately determining what any foreign currency will do this year is going to be an extremely difficult task as the market continues to trade on sentiment rather than statistic. We have already seen the Pound stage a double day 2 percent comeback in the first week of January suggesting that we aren't going down without a fight.   

I think everyone would agree that we have yet to turn the corner in the UK and even when we do the uphill struggle has just begun. Major focus for the first quarter of 2009 more than likely will be interest rates as the Bank of England still has the unfortunate task of trying to stimulate an economy that is close to breaking point.    

Against the majors - GBP>EUR & GBP>USD, one can't help but feel that both the Euro and the US Dollar remain slightly over valued. Only time will tell whether the Euro can withstand the effects of an unforgiving credit crunch and whether the Dollar can protect itself from an oil price destined to rise as production drops. 

Generally speaking, currencies with higher interest rates offering greater returns like the ZAR, AUD and NZD tend to fair well in times of uncertainty. Things that I'll be paying attention to this quarter will include Retail Sales figures, Interest rate changes, Consumer Price Inflation, Unemployment figures, House Prices and general Consumer Sentiment.