Forex forecast: Muddle, muddle, China trouble?

The outcome of the Commodity Futures Trading Commission's recent 10:1 forex leverage proposal is still in limbo, and forex dealers and traders (including many Futures readers) are still busy hurling their wrath at the agency until the comment period closes on March 22. But in the meantime, GAIN Capital/Forex.com released their outlook for forex markets for the second quarter of 2010. And the forecast is a muddled, choppy one.  

Forex.com says key market themes for 2Q 2010 include prevailing choppy, range-bound short-term trading conditions; continuing Eurozone/UK credit concerns causing the euro to be under pressure and the pound to weaken;  a weaker yen on Bank of Japan rate easing and the likelihood of outperformance by the Canadian and Australian dollars. Forex.com analysts also say China's efforts to restrain its economy are a "major risk to global economic recovery." As for the U.S. dollar, they say it will benefit on growth divergence, increased risk appetite and speculation that the Fed will raise interest rates. “We expect the U.S. recovery to outpace other industrialized economies, likely lending the dollar support and keeping pressure on the euro, the pound and the yen,” said Forex.com Chief Currency Strategist Brian Dolan in the report.

Our experts will offer up a complete forex outlook in Futures April issue, on newsstands and online March 26. The issue also includes our Traders View of the World feature, for which we traveled to Washington to talk with Congress, the CFTC and other insiders about how new regulatory proposals could rock the trading universe.

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