• Home ::
• Technical ::
• Forex Strategy ::
• Daily Forex Commentary

• Send
• Print
• Add To
• Rss

Daily Forex Commentary

7016c6e4-6679-413c-ba6a-5a0a1b02a068

0

0

Wake−up Call!

Fri, Sep 5 2008, 06:36 GMT
by Jyske Bank Team

Jyske Bank

Today’s comment

Majors & Scandies

By the Majors & Scandis Team

Hey guys! –this is a wake-up call to all of you who think this looks like attractive levels to obtain further FX funding. Take a look at what is going on at the moment:

• Virtually all stock indices in the world fell by 3% yesterday. How often does that happen?

• EURJPY was down by almost six (6!) figures yesterday. How often does that happen?

• EURCHF has left the building! –meaning that it has left the safe-old territory of levels above 160 (466 vs. DKK). This can very well mean that we are facing sub- 155 levels in the near-term.

• AUD and NZD have fallen almost 2% during the night. NZD is currently trading below daily close of August last year.

• S&P 500 closed below 1250 yesterday.

• Do you really think this is over??? – the Fed is not able to cut rates by 75bps this time and save the world once again.

2x unchanged and 1x hike were the results of yesterday’s rate announcements from the ECB, the BoE, and the Riksbank. The European Central Bank and the Bank of England both kept the key rates unchanged while the Swedish central bank, the Riksbank, raised rates by 25bps. The outcomes for the ECB and the BoE were widely expected by the market while economists were more split in the Riksbank case. In addition to raising rates, the Riksbank lowered the repo rate path, which leads us to suspect that it is the last hike in this cycle. Our economists are expecting cuts in Q2 and Q3 ’09 due to the darkened growth outlook. EURSEK fell initially, but bounced back quite quickly reaching intraday highs 951.07.
However, the pair is trading around the same levels as before the rate announcement. Mr. Trichet did not signal cuts in the near-term and kept the inflation focus, which meant upwards adjustments to the inflation forecasts for both 2008 and 2009. We have reached our short-term target on the dollar and even though it is indeed likely that the dollar is going to reach higher levels, we prefer to take profit and stand by while other parties are fighting in the market. Hence, no new recommendation for now. The irrational behaviour in the financial markets at the moment also means that we take our profit in our long JPY position. JPY and CHF are aiming for higher levels, but as mentioned before we prefer to let others fight the battles in the market at the moment.

Emerging Markets

By the Emerging Markets Team

Yesterday, the sell-off in EM currencies continued, with the likes of the ZAR and the TRY losing another per cent against the EUR. But this time round, EM was in better company: the global sentiment has taken a clear turn for the worse, with global stocks e.g. selling off some 3%! On this background, it is more understandable - and less disconcerting - that EM comes under pressure. Once again, however, we lack a clear catalyst for the sell-off. True, the ECB did not lend much of a helping hand (and a down-shift of the growth forecast and the opposite for the inflation forecast clearly smells like something rotten), and true, initial jobless claims did disappoint on the upside (hinting at worse NFP's to come), but none of these events should in themselves be too cataclysmic for financial markets. Maybe markets are realising that a more severe growth downturn is looming ahead, as we have warned for some time. Hence, while our longer term views remain unchanged, we seem to be heading into rough waters. Positionwise, we stick to long TRY/short ZAR and argue that now is not the time to take on additional risk. Now is not the time to forget what childhood painfully taught us: some things are best not done against the wind!

Today’s Key Events

• 08:50 ECB’s Trichet, Stark, Bini Smaghi speak, EUR

• 09:00 PPI, CZK

• 10:00 Industrial Production, NOK

• 12:00 Industrial Production, DEM

• 12:30 Gonzalez-Paramo speaks, EUR

• 14:30 Non-farm Payrolls, USD

• 21:55 Fed’s Yellen speaks, USD

• Download Full Daily Forex Commentary

Published on  Fri, Sep 5 2008, 06:43 GMT