World Cup Takes Pressure Off The USD

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Currency markets are well known for looking for distractions, London’s Lloyds TSB economic team points out.

This time round it is the World Cup that is drawing attention away from issues at hand and that seems set to take the pressure off the US dollar, in the short term at least.

The economists are of the view that 1.2700 (against the euro) will be tested imminently with 1.2600 or 1.250/70 possible by next week.

However, they feel the pair will then head back up after the initial drop.

As far as the Australian dollar is concerned, the economists say the "commodity strength story is way over done on the upside."

As such, any significant correction in commodity prices is likely to impact the AUD, as well as the CAD, and to a lesser extend the NZD.

Historical analysis shows the economists that there is a correlation between the EUR/USD rate and the price of oil, particularly over the past 12 months.

Therefore, they predict oil prices to enter a corrective phase as the EUR/USD takes a dip.

By Terry Hughes

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