Forex Video : The USD and the ECB

ACM Advanced Currency Markets Chief Market Analyst Peter Rosenstreich answers questions about the rebound of the USD and the ECB rate policy.

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Name: Peter Rosenstreich
Position: Chief Market Analyst
Company: AC Markets
Date: 05/06/08
Time: 10:53 CET
Channel: CNBC Europe
Duration: 2 mins 57 secs
Interview with Peter Rosenstreich

Ross Westgate
Dollar: strengthening once again this morning, particularly against the Yen. For the first time
in three months, Dollar/Yen has hit that 106 mark. Ahead of the Bank of England and ECB
rate decisions, currencies are a little bit lower. Euro: heading back down towards the 154
level that we hit late Tuesday in the US session. Sterling/Dollar at the session, low: 1.9486.
Euro/Yen: 1.9356. Joining us for more: Peter Rosenstreich, Chief Market Analyst at ACM.
Peter, on Tuesday, Mr. Bernanke talked about the dollar weakness being a contributing factor
for inflation. Yesterday, he talked about inflation. How much further can the Dollar climb here
on these cross rates?

Peter Rosenstreich
Well, you know, on Bernanke’s comment, I think we’re probably seeing the most strength that
we’ve seen out of it. However, we do predict that the Dollar will continue to appreciate due to
the changing gradient between where the Fed stands and the fact that in Q3-Q4 2008, the
ECB, specifically Trichet, will start softening his tone on interest rates and going to have to go
lower. That will cause the Dollar to head below the 150 levels.

Brian Shactman
Peter, in terms of – Peter, what are the ranges here - we’re talking mid-term and long-term
here, maybe - through the end of 2008? If they go below 150, that would be out of the current
range, so what is that next jump?

Peter Rosenstreich
Correct. The next jump is right now; we’re sitting on it right now: the 154 level. That’s a big,
big level, and that’s a range that we’ve been stuck in for quite a while. The next level once we
break that 154 is heading down to the 150 level. We believe we can go as low as 145 within
Q2 of 2009, so those are basically our benchmarks and where we’re looking to trade in midterm
and long-term.

Ross Westgate
Peter, you talk about the ECB cutting. The market right now is pricing in rate hikes, okay?
They’ve got to change their tune pretty quickly to get to your view.

Peter Rosenstreich
Correct. Today specifically, Trichet is going to go as hawkish as he can without stepping over
the line. In fact, there’s enormous event risk surrounding his comments that he’s going to say
something and the market’s going to misinterpret it as a signal that he’s going to go higher. I
think, overall, looking at the moderating growth, looking at the mid and long-term expectation
for inflation, the ECB is going to stay away and do whatever they can without raising rates.

Maura Fogarty
Any chance that they’re going to be forced to cut rates at some point this year, Peter?

Peter Rosenstreich
Well, yes; that’s exactly our hypothesis right now is that in late Q3-Q4 2008, that the ECB is
going to start softening their tone and get the market prepared to go one lower.

Ross Westgate
Peter, good to see you. All will be revealed later. Thanks very much.

Peter Rosenstreich
Thank you very much. Bye.

Ross Westgate
Peter Rosenstreich, Chief Market Analyst at ACM.
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