Forex: “there will be no outright collapse of the euro zone in 2012”

LONDON | Analysts at Forex, the retail division of Gain Capital, a global provider of online trading services, expect worldwide economic growth to stall, increasing the possibility of a global recession.  As a result, they foresee the USD becoming a global safe haven, taking strength from repeated waves of risk aversion triggered by potential events such as EU sovereign ratings downgrades, weak economic data, and ongoing credit market stresses in Europe.

The 1Q Markets Outlook report, released this week, focuses on major economies’ currency movements as well as across asset classes. Brian Dolan, chief currency strategist at Forex, said:

“We are not anticipating an outright collapse of the euro zone, but price falls are likely to be sharper and steeper than any rises. We also can’t exclude the possibility of a catastrophic decline in the stock market along the lines of the 2008 market meltdown.

“Investors seeking relative stability will look to the USD. Therefore, we expect the USD to gather momentum in the first quarter,” he explained.

Other expectations from the Forex 1Q 2012 Markets paper include:

  • USD rally being generally bearish for commodity prices overall.
  • Massive amounts of EU government and bank debt needing refinancing in 2012 with investors being increasingly skittish, conceivably leading to defaults
  • Swiss National Bank and Bank of Japan continuing to intervene to prevent CHF and JPY from strengthening further providing possible trading opportunities
  • Bank of England pursuing a third round of asset purchases after the current program is completed in March, maintaining downward pressure on Sterling
  •  In addition to financial risks in 2012, investors need to judge significant political risks that could make for a volatile first quarter

* The full Forex 1Q 2012 Markets Outlook Report is available at under “Research & Ideas”.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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