Shuffling the cards in 2006

In 2006, the cards are being shuffled as the interest-rate game adds a new twist. Shifting trends in the interest rate cycle will emerge and so will new currency trends.

The first three weeks of 2006 already ushered in the beginning of a new trend: The EUR/USD rate rallied from 1.18 to 1.2180. With the end of the Fed’s tightening cycle in 2006 imminent, the end of the dollar’s rally becomes ever more likely.

Knowing what changes may be expected next from central banks and when they might occur will be an important part of identifying emerging trends in the year ahead. Of course, many unexpected events could happen over the course of the year, as it has occurred in the past. The following sections outline some scenarios based on information as of mid-January.