The slowdown comes mainly from the side of the consumer spending closely linked with the level of employment which, while improving, does not in a clear and definitive manner. Not for nothing is one of the main points where the Federal Reserve has since the eye when deciding the removal of expansionist extraordinary monetary policy measures which currently hold in United States. In this sense, the number of unemployment claims has been higher than expected, over 400 k per week.
In addition to this, pressure from prices of energy and food is still there and that is why one of the favourite indicators of the Fed, the PCE, “personal consumer expenditures” has been revised upward, in a range between 1.4% and 1.6%. Now we can go understanding better the release of the Fed and Bernanke responses to the first session of questions to which a Chairman of the Federal Reserve has been tested in history, after a meeting in which deliberated on monetary policy.
In a certain way is understandable resistance to tightening credit conditions, when they are not yet sure if it has gone totally from the tremendous recession afflicting both United States and the rest of the world. That is why still less understandable in Europe, the ECB has embarked on a process of rate increases.
Taking all this into account, assuming already that, until after the summer, we are not going to know anything about a hypothetical change in us monetary policy and assuming that low interest rates are those who are causing the weakness of the currency of that country, we can conclude that the dollar will continue to weaken or at least will be maintained at current levels, but would do so against all the currencies?
Well, I think that no, at least not with the same intensity. The weakness of the dollar will remain and perhaps it will accentuate against currencies in Asia starting with the Chinese yuan and going through the rest as the Korean won, the Malaysian rupiah, the taiwan dollar… etc, and also against the Japanese yen. In this latest currency, although it is not linking to the rest of the Asian, should take into account the stage of slow recovery that its own central bank has promised remain it in a relatively strong position, paradoxically, when not used as a vehicle for carry trade and to be less the Japanese investment abroad.
Against the euro, the dollar has up 1.5150 rise, from a technical perspective space and it is possible that we will see that level. It must be taken into account in any case that soon there will be complaints both Germany and France for what those levels adversely affect their exports. And somehow, I at least see it, give you think the Council of the ECB on the suitability of future rate increases in the short term. If this is the case and stop the upload process it is possible that we saw a ceiling in this currency pair pre-crisis levels.
And in the midst of this weakness which is considered the currency benchmark and the fears that the euro can raise both debt problems and its already long way upward journey I think, as I have already mentioned in previous articles that can get benefited currencies such as the pound sterling that I see the levels of 1.70 against the dollar and the Polish zloty, which also has the support of its authoritieswhich have announced a program of buying its currency to strengthen it and thereby combat inflation.
We have seen that the euro against the zloty has an important way downwards, to the area of 3.60. And I would add another pair, little visited but not less interesting that is therefore CHF PLN. I think that the Swiss francs can also be sold strongly and confirm a formation of head shoulder would be talking about a downward movement of around 8%.