By Andrei Skvarsky.
FxPro, a global forex broker, predicts that the world forex market will be characterised by greater volatility and shorter trends in 2014, with the US dollar, euro and sterling getting somewhat stronger and the yen further weakening.
The dollar will show “conditional” strength, “which means that we are not heading for a secular dollar bull market as the Fed starts tapering”, the London-headquartered brokerage said in a study.
“The euro will continue to surprise to the upside in the early part of the year, supported by current account dynamics, declining liquidity and low inflation, putting a break above 1.40 on EURUSD in sight,” it said.
Sterling is expected to be buoyant early on, but the post-crisis recovery dynamics based on cuts in real wages and savings “are not yet conducive towards a sustained recovery”, FxPro said. “The yen will continue to weaken, but to nothing like the degree that was seen in the early part of 2013.”
The Australian dollar will “suffer” as Australia’s central bank is likely to reduce rates and the economy would be re-balanced, FxPro forecasts.