A Currency World Cup - Winners and Losers

currency world cup

Currency experts HiFX comment on the currencies that will lead the way during the World Cup.

Ahead of this year’s World Cup tournament, Chris Towner director at HiFX gives us an insight into the currencies he thinks are set to be strong performers this summer and over the next four years:

“Brazil is our tip for Group A winners, with the Brazilian real leading the way in the group. Four years ago the Brazilian real was dealing at 1.85 to the US dollar, while currently it is dealing at 2.22. This reflects a 20% weakening in the Brazilian real. Despite this recent weakness, the home team is not just tipped as a favourite to win the World Cup competition, but the Brazilian real is also tipped to be a winner over the next four years and strengthen against the US dollar back towards 1.85.
“Spain is our pick for Group B. Spain and indeed the euro have bounced back well since the credit crisis with the euro strengthening by over 10% since the last World Cup. However, the outlook for Spain and indeed the euro is for weakness over the next four years as Europe suffers from falling prices and high levels of unemployment.
“We expect Japan to be the winner in Group C. Four years ago, the Japanese yen was in demand as Japan was perceived as the safe haven from the credit crisis, but since then we have seen the yen weaken by over 10% as Japan continues to print money in order to try and reach their 2% inflation target.
“It is safe to say that England would be our pick for Group D. If only the English football team’s performance matched that of sterling’s over the past four years. In 2010 GBP/USD was down at 1.45 as the credit crisis struck the heart of the service sector. Since then the UK economy has responded well and sterling has rallied by over 15% against the US dollar. The problem though going forward for the UK is whether it can maintain its current form.
“Switzerland should top the leader board in Group E. The Swiss franc has been the winner over the last four years in the FX markets climbing by over 20% against the US dollar. It’s been so strong that the Swiss National Bank has intervened to curb its strength. Going forward, we expect the Swiss franc to hold its value.
“Argentina is expected to pip the rest to the post in Group F. However, the Argentinian peso has halved in value since the last World Cup and this currency needs to pick up its form if it is expected to develop beyond the group stages.
“The USA will dominate in Group G. The US dollar is certainly the mightiest of all currencies as it’s involved in over 85% of all FX transactions. It has weakened somewhat since the last World Cup. However, this currency can never be underestimated and should do well going forward.
“It’s too close to call between Belgium and Russia in Group H; we expect both to be the joint winners. However, it’s the Russians with their rouble who have underperformed over the past four years and there is room for improvement here.
“And the football World Cup champions of 2014 will be….
“We will leave the World Cup winning forecast to the experts; in terms of currencies we tip the US dollar over the next four years as their trade deficit improves among the major players; and the Brazilian real as the emerging market winner just as they start hosting the Olympic Games.”