Post date: Dec 05, 2012 3:2:2 PM
SENIOR FOREX STRATEGIST AT CREDIT AGRICOLE CIB, ADAM MYERS,
Q1. Let me ask you first, how realistic you think the possibility of the UK losing its AAA is.
"I think there's a very high probability that the UK does lose it. Obviously, many other developed core economies have been in the same position as the UK in previous months and they've lost their ratings. So I don't see any reason why we shouldn't follow over the next three to six months."
SENIOR FOREX STRATEGIST AT CREDIT AGRICOLE CIB, ADAM MYERS,
Q2. How come Sterling's doing so well if we're worried about this?
"Safe haven inflows. The European economy is doing worse. Foreign investors are worried about their financial portfolios and so safe haven inflows are coming into short-dated securities denominated in British Pounds."
SENIOR FOREX STRATEGIST AT CREDIT AGRICOLE CIB, ADAM MYERS,
Q3. But the Euro looks pretty perky itself. We're up, closing on 1.32 now?
"Absolutely. The foreign exchange market at the moment is dominated by central bank diversification flows. Obviously, banks like the People's Bank of China, they buy Dollars. They recycle some of those into Euros and then they recycle some of those again into British Pounds and that's dominating FX market volatility at the moment."
SENIOR FOREX STRATEGIST AT CREDIT AGRICOLE CIB, ADAM MYERS,
Q4. How high is Euro-Dollar going to go, do you think?
"I think Euro-Dollar can go all way to 1.33 before the end of the year. That of course is dependent upon the news that we get out of the Eurogroup meeting next Wednesday."
SENIOR FOREX STRATEGIST AT CREDIT AGRICOLE CIB, ADAM MYERS,
Q5. And how big could the fall be for the Euro if and when it comes?
"Oh, very significant. I think we could go down all the way to 1.20 during the course of 2013. And that's of course because the US economy has insulated itself first, both via its monetary policy and via its FX policy. And that is really going to benefit the US economy whereas the Europe doesn't have the same privilege and that is of course, meaning that we're going to see lower growth in Europe and necessarily a weaker Euro next year."
SENIOR FOREX STRATEGIST AT CREDIT AGRICOLE CIB, ADAM MYERS,
So, what is your FX play or Credit Agricole's FX play for next year?
"Well, I think the best thing to do especially in the core markets is wait for that squeeze in Euro-Dollar that we should see in the next couple of weeks. The confluence of good news in Europe with the delivery of a Greek package and of course, the negative news inEurope in terms of that fiscal cliff. But sell into that squeeze and then see Euro-Dollar fall throughout 2013, perhaps as low as 1.20."