A further rise in unemployment is expected

EMEA Daily

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Review

As expected, the Polish central bank (NBP) yesterday kept its key policy unchanged at 3.5%. However, the NBP changed its (informal) bias from an easing bias to a neutral bias. However, we do not believe it changes anything for the outlook of monetary policy, as the NBP is likely to remain on hold for some time to come.
South African inflation for September decelerated more than expected and is at this moment very close to upper end if the central bank’s inflation target range.
Yesterday, the Hungarian Finance Minister Peter Oszko said that he expected parliament to approve the main figure of the 2010 budget in a vote next week.

Preview

South African producer prices and private sector credit for September are due for release today. Also Hungarian unemployment is ready to be published today. A further rise in unemployment is expected.

Trading update

Yesterday the sell-off continued in the EMEA FX and fixed income markets. The worst performing currencies in the region were the Hungarian forint and the South African rand. In that connection it should be noted that on Tuesday we opened trade recommendations to Buy EUR/HUF and USD/ZAR. We keep both positions open as we believe there is more potential in both trades.
What on Tuesday started as a FX markets sell-off has now spread to the EMEA fixed income markets and markets rates and yields are spiking across the region. We continue to see potential for higher rates and yields across the region – especially in Hungary. During Tuesday and Wednesday EUR/PLN, EUR/HUF, EUR/CZK, USD/ZAR and USD/TRY have all broken above the 100-day moving averages – which is a pretty clear technical signal that the sell-off in the EMEA currencies could continue. Furthermore, our EMEA FX scorecard has turned even more negative – primarily due to more negative scores on the technical factors and a worsening of global conditions. We therefore continue to recommend being positioned for further weakness in the EMEA currencies – and for that matter for higher rates and yields across the region.

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Published On Thu, Oct 29 2009, 07:01 GMT

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Danske Bank A/S

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