Forex Video : Dollar to Gain on Obama Policies

Peter Rosenstreich, chief market analyst at ACM Advanced Currency Markets, talks with Bloomberg's John Dawson from Zurich about the impact of Barack Obama's U.S. election victory on the dollar and the outlook for tomorrow's Bank of England interest-rate decision. BOE policy makers will lower the benchmark interest rate by at least half a percentage point as the country heads into its first recession since 1991, economists say.

RSS VIDEO FEED

Name: Peter Rosenstreich
Title: Chief Market Analyst
Company: AC Markets
Date: 05/11/08
Time: 09:49 GMT
Channel: Bloomberg UK
Duration: 4 mins 33 secs
Interview with Peter Rosenstreich


John Dawson
Our next guest says the Obama win will be good for the dollar. He is Peter Rosenstreich, Chief
Market Analyst at ACM – Advanced Currency Markets, joining me now from Geneva. Good
morning to you, Peter.

Peter Rosenstreich
Good morning; thanks for having me.

John Dawson
Pleasure. You are bullish on the dollar fact. Also, on the Obama win, you’re even more bullish.
Why?

Peter Rosenstreich
Well, you know, first of all, we were very excited about the aspect of a new regime taking over the
US. We believe there’s an enormous number of mistakes that are pretty clear in the market’s
eyes that I fully believe that you can equate to the Bush administration. The original forecast was
for continued dollar strength, and having Obama’s win I think just creates this strong sense of
euphoria that’s going to play very well in risk appetite and the positive sentiment going forward.
All of that’s going to translate into a stronger US dollar.

John Dawson
Euro/dollar now, Peter, is 1.28. What are your forecasts now going forward, six-month forecast?

Peter Rosenstreich
In six months, we believe we’re going to be hovering around the 1.20, 1.21 levels. We think the
appreciation’s going to be slower than what we’ve seen in the past or sort of the last few months,
but we’ll continue to see steady appreciation in the dollar. We think the first thing that Obama’s
going to do is come out with a second fiscal policy. He’s gotten the support from the US
government – excuse me, support from the US people, he owns most of Congress, the White
House. He’ll be able to push that initiative through, and that’s always very supportive for both
equity markets and the underlying currency, the US dollar.

John Dawson
Many say it’ll be a bear market rally, but is more an Obama rally this next month?

Peter Rosenstreich
Very much so. I think that’s a good way of putting it. It is going to be a bear market rally.
Conditions for equities are not ripe at this point. The fiscal stimulus package that is going to be
pushed in only gives a temporary respite to what we’re expecting to be a very deep and long
recession both in the US as well as globally, and the fact that the US have a soaring budget
deficit needs to be addressed. Actually, by spending more money, it doesn’t necessarily do that
in the longer term. Equities are going to hover, but we should continue to see appreciation in the
US dollar, specifically against the Euro and the Pound.

John Dawson
Peter, please stay there because after the break, more from Peter Rosenstreich, Chief Market
Analyst at ACM – Advanced Currency Markets, more on currencies, of course. He’s in Geneva.
(break)

John Dawson
Back with my guest, ACM’s Peter Rosenstreich in Geneva, waiting patiently. Peter, the Bank of
England will cut rates tomorrow, many have forecasted, by 50 basis points. What should they be
doing?

Peter Rosenstreich
Well, you know, our forecast is for 75 basis points. We believe that they need to start really
aggressively cutting monetary policy. They need to get much lower. There’s no reason
whatsoever why they should be holding anything back. You saw prices paid came out yesterday.
It looks like sort of the inflationary scenario seems to be easing. Yes, the decline of the cable
imports some level of inflation, but at this point, they really need to go in there and stimulate the
economy. They’re taking it from all three angles. Number one, the financial sector’s really taken
a hit. The house market continues to deteriorate, and probably the biggest factors, both the
Eurozone and the US, are fully in a deep and prolonged recession at this point. That means their
exports really don’t have a market to sort of help them out of this situation. The BOE needs to
start aggressively addressing this factor.

John Dawson
Peter, is the Pound the sick-boy, if you like, of the currency markets right now?

Peter Rosenstreich
I think so, and it has been for quite a while, to be completely honest. I think a lot of the indicators
were pointing that the cable needed to come down significantly, that rates need to be adjusted
very aggressively, and yet the BOE was probably a little slow to the start. That gave the markets
the ability to start putting on the trade probably three or four months before the BOE really got the
first signal that it needed to go down aggressively.

John Dawson
Thank you very much indeed. Peter Rosenstreich there, the head of markets at ACM, speaking
to me there from Geneva.