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June 25th, 2010 at 6:32 pm

What corporations think about Euro

JPMorgan Chase & Co. conducted a survey of their corporate clients regarding the Euro. Corporations from Europe, U.S. and Japan where asked where, in their opinion, will the Euro (EUR-USD) be at the end of the year. Turns out that almost all of the participants, over 90%, expect the EUR-USD to be under 1.3000, with the average forecast 1.2200 at the end of 2010. The average prediction, or expectation, for the end of 2011 by the corporate world is 1.2500.

Interestingly enough, there was a fairly wide difference of opinion about next year. European companies tend to be much more optimistic about the common currency, expecting the EUR to rebound to above 1.3000 during that time, while their American and Japanese counterparts see more downside. But together, as a group, corporations are generally speaking bearish to flat about the Euro.

This segment of market participants is growing in size and importance when it comes to foreign exchange market. Multinationals typically do not engage in speculation, only hedging, but the volume they generate can influence currencies. Trillions of dollars are hedged every year and this number is ever increasing. While not each and every transaction is hedged, corporations try to cover more and more of their total foreign exchange exposure. That figure rose to 64% from 58% few months ago. Big players.

With the Euro weak and, evidently, heading lower still, the buy order in EUR-CHF  has not been filled, same for USD-CHF from earlier in the week. I’ll keep an eye on all Swiss Franc pairs and return to them at another time, probably not too far in the future. Just tracking the latest highs…All said, this has been good week and it is time to rest. Have a great weekend!

Mike K.

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4
  • Stan
    5:34 am on June 26th, 2010 1

    So I guess you are going to wait and try not to play both sides of the market

  • admin
    6:04 am on June 26th, 2010 2

    For now, yes. I’ll do my analysis tomorrow and decide then.

  • Lila
    6:27 am on June 26th, 2010 3

    Hedging is an interesting concept. Do you do any of that?

  • admin
    5:23 am on June 27th, 2010 4

    Yes I do, but don’t discuss it in the blog.

 

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