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All eyes on the US, which holds the key Back  
Currencies outlook
Derek Keogh, manager of Corporate FX Desk, Anglo Irish Bank

EUR/USD 0.95
EUR/GBP 0.64

Looking back: The euro confirmed my expectations - by testing new lows over the quarter concerned. But instead of the move being as a result of the lack of interest rate tightening, it was a result of failed unilateral intervention attempts. The ECB clearly missed an opportunity in October to support the currency through G7 intervention, an option that obviously was not afforded to them. The euro looked likely to break the $0.90 level in early December, but ran into further selling pressure. It was a difficult month to trade in, with little direction and generally thin markets. The US election re-counting did not help in this regard. The yen finally started to weaken out against the dollar on the back of the political nervousness and lack of confidence.

Looking forward: The US economy ‘soft-landing’ sentiment prevailing should aid the euro in the coming quarter. While US interest rates look bullish in the medium term, the markets are closely watching data releases for any sign of any inflation. Sterling will continue to be driven by mergers and acquisitions, with investors constantly bearing in mind the current lows from a historic perspective. Sterling has looked comfortable at $1.50 levels in the past and given the current US economic background, this looks sustainable. There is a risk of the market getting over-long euros into the new year, and renewed selling if the currency fails to break the key $0.96 level. If the euro does break through this key level, we can expect a new range against all currencies, based around $0.90.

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