Currency EURO

Use the forward quotes for 12M to develop a one-year numeric forecast for the direction of the pair. Students analyzing an indirect pair must clearly differentiate between foreign currency and the pair.

Use the CME futures market to develop a one-year forecast for the direction of the pair. Students analyzing an indirect pair must clearly differentiate between foreign currency and the pair.

Use the LIBOR rates to develop a one-year forecast for the direction of the pair. Students analyzing an indirect pair must clearly differentiate between foreign currency and the pair. 4) Using the three forecasts, calculate the expected movement for the foreign currency and for the pair

Calculate the annual forward premium for the foreign currency using the following time intervals: 1 week, 2 weeks, 1 month, 2 months 3 months and 6 months. Identify the direction for the foreign currency and compare to the average forecast reported above

Compare the annualized forward premium calculated with short intervals to the one-year number. Are the numbers similar? Is there a pattern? What could be the causes for the difference?

Compare the forward premium calculated above to the consensus forecast included in the FXstreet website. Is the direction the same? What factors do you think the analysts used to develop their own forecasts? Use the spot value obtained in Part 2 to evaluate the goodness of the various one-week forecasts. Identify analysts that were close to the actual value.