GO
Loading...

Euro or Dollar? The Ugly Contest Is Back On

Tuesday, 2 Aug 2011 | 3:01 PM ET

The debt ceiling debacle and the la

Shannon Fagan | Image Source | Getty Images

test Greek bailout deal are almost behind us, but euro and dollar investors still aren't happy.

How about that Congress, huh? They actually managed to pull out a debt-ceiling agreement, playing just a bit more brinksmanship than the euro zone leaders who cobbled together a bailout deal for Greece at the eleventh hour.

Still, deals or no deals, currency investors are still lukewarm - at most - on both the euro and the dollar. Here's a review of the two by Goldman, which is looking for a $1.55 euro a year from now:

"Our EUR/$ forecast should be seen as part and parcel of broad USD weakness (as opposed to a strong statement on EUR itself)."

At Scotia Capital, Camilla Sutton, chief currency strategist, expects the euro to trade in a range of $1.395 to $1.47 and reach $1.45 by the end of the quarter - but she's not exactly bullish on the single currency.

"The economic outlook for Europe continues to be fragile with the biggest risk being a further deterioration in growth combined with strict austerity," she wrote to clients. As for the dollar, "The US fiscal deficit and debt positions combined with the rapidly deteriorating prospects for the US economic outlook, a weak GDP print, ISM falling to 50.9 and slipping confidence should see the USD weaken off further between now and year-end." In other words, the U.S. economy is weak and getting weaker, and it won't do the dollar any good.

Meanwhile,Italian and Spanish bonds are weaker today, apparently reflecting concerns about the reach of the recent sovereign debt agreement.

All in all, there's no obvious side to take in the world's most liquid currency trade. You're probably better off trading the big dogs against other crosses.

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm.

"Money in Motion Currency Trading" repeats on Saturdays at 7pm.

  Price   Change %Change
USD INDEX
---
GS
---

Featured