| Interest rates to remain steady over next six months |
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| Each month, the Finance Markets Panel, which consists of leading Irish market participants and analysts, provides views on key financial markets, covering currencies, equities and the gilt markets. |
This month’s contributors are: James Jordan, technical analyst, Ulster Bank, Eugene Kiernan, head of asset allocation, Irish Life, and Enda Coll, head of institutional treasury, Anglo Irish Bank.
Euro 1 month interbank rate
In light of the ECB’s recent 50 basis points interest rate cut, which brings the ECB refinancing rate down to 2.75 per cent, the lowest level in over three years, Enda Coll says that this more aggressive move by the ECB makes it less likely that they will move again for some time. He predicts that short-term euro rates will remain at current levels of 2.85 per cent for the next six months.
5 year euro swap rate
Coll forecasts that longer-term euro rates will continue to consolidate within a 30 to 40 point range and says that five-year swap rates should continue to trade between 3.8 and 4.2 per cent for the next three months, and he predicts that the rate will be at 3.95 per cent in March 2003.
Euro/STg
Coll says that the Eur/Gbp is likely to continue to track movements in the Eur/Usd over the next few months. However it is unlikely to trade outside the range of the last six months of .6250 to .6450 he adds. With the Bank of England unlikely to cut interest rates further, the attraction of sterling as a high yielding currency is likely to keep it underpinned against the euro says Coll which means that this is likely to remain the case going into 2003 with the bias for the euro likely to be lower towards .6300.
Euro/Dollar
Eugene Kiernan says that these are tough times for currency traders with exchange rates being very stable for most of the year and there has been little deviation in the past few weeks. He sticks with his view of the euro and the $ being in a 95-100 range for the time being. James Jordan says that the longer term view is that EUR/USD will make new highs towards targets of 1.03/1.05, but the question is from which base it rallies from. For now assuming 0.9860 recently marked the low and a new upleg is unfolding. Any break under 0.9860 postpones the upside and opens up 0.9600 before basing occurs.
DJIA
The two month, 25 per cent bear market rally is over says James Jordan, and he predicts that the longer term downtrend is now about to resume. Further confirmation comes with break below supports at 8300 and then 7900, further out he says and believes that the entire rally from 7204 should now be unwound. Only making new highs over 9045 will prove this view wrong, which isn’t bad risk reward he says. Kiernan can see the DJIA going to 9000 in 3/6 months and thinks there is reasonable value in markets but recognises that the ‘geo-political’ risk remains in the background.
10 year euro bond yield
It’s been a wild ride into the end of this year but a clearer trend may now be emerging says Jordan. Recent consolidation/correction off 4.44 yield looks complete with a new down-leg about to unfold, targeting an eventual return to the 4.37 low now. |
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| Article appeared in the November 2002 issue.
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