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Daily Forex Commentary

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Notorious Hawks

Thu, Aug 28 2008, 06:16 GMT
by Jyske Bank Team

Jyske Bank

Today’s comment

Majors & Scandies

By the Majors & Scandis Team

Yesterday proved that the euro is not quite ready to throw in the towel just yet. Axel Weber & friends, notorious hawks, were on the wires yesterday talking the usual hawkish talks. At first it seemed a bit surprising that the market reacted that aggressively on especially a speech from the well-known über-hawk aus Deutschland Axel Weber, but it might have been just what the market had been waiting for since Trichet was unexpectedly dovish in the beginning of July. The euro has been sold massively over the last month and a half and there is no doubt hat quite a few people in the market (ourselves included) have felt that at least at some point the euro sell-off has gone too fast. The Hawkish talks from the ECB members yesterday were as we see it just a statement from the central bank that the market should not anticipate any cuts this year. It has also meant that it has gone the wrong way for our three latest recommendations and in the case with EURGBP that we were stopped out last night. We do not view this as a sterling case and it does not change our short-term view on the British pound, but we have to acknowledge that our timing was wrong. Hence, no new recommendation for now.

Emerging Markets

By the Emerging Markets Team

Yesterday was an eventful day on EM purely data wise with CPI from Iceland and South Africa as well as rate announcement from Poland on the agenda, but none of the releases were able to surprise the market. Icelandic CPI came out as expected and hence turned out to be a non-event. The number should have surprised significantly on the upside in order to spur expectations of further hikes in the key rate. We maintain our view of Sedlabanki keeping the key rate on hold at 15.50 % in the coming months as an expected slowdown in the economy will help dampen inflation. In South Africa CPI also came out as expected.

ZAR closed almost unchanged against EUR but market rates fell 15 bps on top of the number.
In line with the market we expect the key rate to be left on hold in coming months. Poland also refrained from surprising the market as the central bank (NBP) chose to keep the key rate on hold at 6 %. The following press statement was rather balanced with NBP stating that in spite of a coming slowdown in Europe the need for further monetary tightening can not be ruled out. We still expect one more hike of 25 bps whereas the market calls for two times 25 bps. The timing to sell PLN still does not seem right and we remain neutral for now. Following yesterday’s packed calendar there are no important data releases on EM today.

Today’s Key Events

• N/A Unemployment, ZAR

• 08:00 Nationwide House Prices, GBP

• 09:00 Unemployment, HUF

• 09:30 Unemployment, DKK

• 09:30 Retail Sales, SEK

• 10:00 Unemployment, NOK

• 11:30 Producer Prices, ZAR

• 12:00 CBI Trades Report, GBP

• 14:30 GDP, USD

• 01:01 GFK Consumer Confidence, GBP

• 01:15 Nomura PMI, JPY

• 01:30 Unemployment, JPY

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Published on  Thu, Aug 28 2008, 06:20 GMT