Turning point

Into 2006, while the U.S. Fed is expected to ratchet up the Fed funds rate a few more times, most analysts acknowledge the U.S. tightening cycle is nearing an end. The persistent and consistent rate hikes in the U.S. have been a main factor supporting the U.S. dollar, especially vs. the Euro, throughout 2005.

Once it becomes clear the Fed is done with its tightening cycle, analysts say the opportunity may exist for a turning point in market sentiment and market focus. In fact, forex players may become more focused on structural problems within the U.S., including the giant current account deficit, which could draw money flows away from the greenback.

That in turn, could open the door for Euro strength, some analysts say.

Ideaglobal’s Powell sees potential for the Euro to return to the $1.2200 zone by the end of first half 2006.