FX Concepts’ Taylor Predicts Risk Rally Before Recession Worse Than 2008’s

European leaders’ efforts to calm the region’s debt crisis will probably pave the way for a rally in higher-yielding currencies before a recession that’s worse than 2008 starts to bite, according to FX Concepts LLC.

Policy makers “are going to kick the can further down the road” at a summit aimed at ending the debt crisis tomorrow, chairman and founder John Taylor, whose firm manages $8 billion, said today in an interview in London. “It looks like we’re going to have a sort of risk rally,” which will lift commodity prices, supporting the Australian and Canadian dollars, he said. Gold may reach $1,900 an ounce by October, Taylor said.

Euro-area leaders are preparing for their second meeting in a month as they strive to resolve a crisis that pushed the 17- member currency to $1.3837 last week, the lowest level since March. Officials are considering steps previously rejected by Germany, including the use of precautionary credit lines, to prevent the crisis spreading, a person close to the talks said.

While FX Concepts is “back in” so-called carry trades, where higher-yielding assets are bought against lower-yielding currencies, the time frame for the trade is “pretty short” because of a looming recession, which will boost the dollar, Taylor said.