What is likely to happen to this over the next 2 or 3 months? OK, I know if people could answer that question we would all be millionaires but to a financial dunce like me what do the economic indicators predict will happen. Having climbed up to around $1.94 to the pound in December its had a bit of a roller coaster ride and the dollar has been rising in value since last month. What are the chances that it will continue to rise in value or will fall again.
Kevin
The dollar is undervalued on a purchasing parity basis. The Big Mac test is as good as any (compare the price of a Big Mac in US dollars against the price in Sterling or Euros). It belongs around the £1 $1.60 - $1.70 mark. With the anticipated NON vote in France this Sunday, I expect the dollar to strengthen until it reaches that level.
On the macro side, the fed has been raising rates whilst the BoE has held for 9 months, that affects flows to some degree.
There's also sentiment about growth, like revised employment data in the US, etc.
Depends if the central banks in Asia are happy to continue to pile up those Treasury bills.
Looks like the dollar is on a rally just now, so the trend for the rest of the year may be up and/or sideways.
Roland
Well, it won't be a straight line move, there will be sub dips and rallies on the way up.
Roland
The best predictor you have available to you of a currency's future value is its current value. There are more knowledgable people than us around and if they knew that the dollar was likely to gain in value in the next, they would buy as much as they could now, driving up the price. Foreign exchange markets are likely to be efficient markets.
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