Likelihood of global recession seemed as imminent with the start of the year 2012, according to FOREX.com 1Q Markets Outlook published on Tuesday.
“The US dollar is predicted to become global safe haven as Eurozone turmoil intensifies,” report added.
FOREX.com, the retail division of GAIN Capital (NYSE:GCAP), a global provider of online trading services, today released its 1Q Markets Outlook report focusing on major economies’ currency movements as well as across asset classes.
In 1Q 2012, FOREX.com analysts expect worldwide economic growth to stall, increasing the possibility of a global recession. As a result, we foresee the US dollar becoming a global safe haven, gaining 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.
“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,” Brian Dolan, chief currency strategist, FOREX.com, said.
“Investors seeking relative stability will look to the USD. Therefore, we expect the USD to gather momentum in the first quarter,” he added.
Other expectations from the FOREX.com 1Q 2012 Markets Outlook include a 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 and in addition to financial risks in 2012, investors need to judge significant political risks that could make for a volatile first quarter.
The FOREX.com research team also highlights potential price ranges for key pairs, such as EUR/USD, GBP/USD, USD/JPY, USD/CHF, and AUD/USD. Key cross-currency pairs like EUR/JPY and EUR/GBP are also covered.