Spanish Boom Written by Romano - 30 January 2003

Clearly, the situation in the Middle East is the overriding consideration for all currency traders and will remain so until it is either resolved peacefully or a military solution begins to unfold, Sadly, it is looking as though the latter option is almost inevitable and the dawning of this realisation is driving the markets.

Naturally, as America is likely to be the main protagonist, the US Dollar has been sold heavily by international investors seeking a safer haven for their funds. The traditional safe places are still popular, hence the rapid rise of the Swiss franc and gold. Interestingly though, the Euro has also strengthened considerably as dealers who had sold the single currency heavily, began to close their trades and even reverse their positions.

This reversal of fortunes for the euro is curious because economically, Europe hasn’t looked this bad in decades. Germany which accounts for 30% of the Eurozone economy continues to announce increasingly poor data – with unemployment at 10%, and economic growth declining it is no surprise that consumer confidence is falling fast.. in these conditions, a recovery looks a long way off and the European Central Bank is seen as a symptom rather than a solution.

The Sterling – Euro rate is falling but in a well defined channel where currently €1.46 is the bottom and €1.51 the top of the trend. It is likely that this range will remain in force until Iraq resolved. The US Dollar has recovered in the last week on the back of news suggesting a postponement of military aggression until further UN inspections have taken place. This cheered the doves and muted the hawks enough for a small scale rebound in the value of the US Currency. Sterling fell below $1.60 for the first time in weeks and the Euro-Dollar rate fell briefly below $1.07.

However, once again, a major recovery in the greenback is not expected until war is over or abandoned. In the interim, a range of $1.5760 to $1.6130 is envisaged with the occasional foray outside of these bands.

In other currencies, the pattern remains the same, rumour and speculation over Iraq creating fairly substantial ebbs and flows in most cross rates. The fall in the value of sterling against the dollar and Euro has been accompanied by a similar move against the Scandinavian currencies. The exception to this rule has been the Norwegian Krone which is far more influenced by the price of crude oil for obvious reasons. Oil has been highly volatile in recent weeks and the Krone has followed suit, trading between NOK 11.01 and NOK11.51 since the start of 2003.

Taking advantage of these spikes and troughs is fairly simple through a specialist dealer like Moneycorp. It is possible to place a market order to capture euros at an advantageous level whenever and wherever the rate achieves your aim. This is known as a limit order and is a tool used by speculative traders to capitalise on the 24-hour nature of the foreign exchange market. Today though, these techniques are available to private clients through specialists like Moneycorp