Here is a laser accurate EURUSD Prediction 2012 Forecast.
After the restoration of European currencies against the dollar with a 4-year low of 1.1870 in June 2010 to the level of 1.4940 in May 2011 the currency pair began to form a new downtrend. Slightly more than half a year euro / dollar has lost 10.6%, dropping to levels of early 2011. Exacerbate the situation in the euro area, which forced investors to rethink the relationship to risky assets, making it impossible to restore confidence in them during the short, medium and even long-term periods.
In line with our baseline scenario, providing the beginning of the collapse of the euro zone in 2012, we forecast that the European currency lost in value significantly by the end of the year. At this rate of decline will be determined by the speed of adoption of the European authorities crisis management measures. It is noteworthy that until March of significant meetings of EU leaders is planned. Given the situation on the brink of the eurozone, it gives reasons to assume a very high volatility in the markets in the early months of next year.
At present the main idea of the crisis is the policy of “austerity.” In addition, it is assumed the imposition of sanctions on the country in case of exceeding the established limits on budget deficits. It appears, however, these measures can only accelerate the collapse of the Eurogroup, as the peripheral countries, being already in a recession, can not afford to cut back on spending indefinitely. The reduction of social costs, among other things, entail public discontent, unemployment, falling spending, which ultimately will enhance the rate of decline of GDP affected countries.
Another consideration the way out of crisis – inflation, involving buying government bonds of the peripheral countries of the European Central Bank. Probably in the first half of the authorities who do not have in the arsenal of effective weapons to extinguish the fire ever growing debt will in this way. This step is essential to push the euro down, and the rate of decline will be even greater than in the past year. After all, saving will not only relatively small Greece and Portugal, but also an impressive Italy and Spain, whose debt is one third of all commitments in the eurozone.
It is worth noting that central banks in Europe have already begun to prepare for a possible collapse of the euro area and the devaluation of the single currency. Thus, the Irish Central Bank is considering the possibility of obtaining additional access to printing for the revival of the national currency. And in Bosnia and Herzegovina, it was decided in the case of dissolution euro block tie the currency to the deutsche mark.
The yield of one or more countries of the eurozone will not constitute a termination of the fall of the euro – for investors to think seriously about the complete disintegration of the monetary union. Distrust of the authorities to provoke a mass exodus of European funds, government bond yields would drive other “drowning” countries.
Thus, the combination of such factors as the output of one or more countries of the eurozone, the European debt bubble inflated, the continuation of “currency wars”, the best state of the U.S. macroeconomic indicators in comparison with Europe, the disunity of views within the eurozone, according to our forecasts, will lead to that in the first half of 2012 the euro will reach $ 1.25 stamps – $ 1.27. Consequences of output in some countries from the Eurozone and deployment programs stimulate the emission and the possible lowering of interest rates in II-III quarter of the European Central Bank will lead to the fact that the euro will continue a downward trend in the second half of the year. We expect to see trading in major currency pair in the range of $ 1.20 – $ 1.23 per unit of the single European currency EUR/USD.