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Daily Forex Commentary

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Another day in the FX rollercoaster

Wed, Sep 10 2008, 07:11 GMT
by Jyske Bank Team

Jyske Bank

Today’s comment

Majors & Scandies

By the Majors & Scandis Team

Once again yesterday turned out to be a bumpy ride in the rollercoaster, with especially EUR/USD, EUR/CHF and EUR/JPY showing extremely high intraday volatility. Whether you like it or not the latest strong downtrend in EUR/USD seems unable to loose momentum and the dollar continues to climb higher against all currencies. The psychological support level at 140 in EUR/USD seems within reach and a coming test seems very likely. As for risk aversion market participants are still on high alert bringing both EUR/JPY and EUR/CHF under pressure. In EUR/JPY the big level to watch is 150, acting as well as a big psychological level. Overnight further concerns emerged about the liquidity in the US banking system bringing the US equities under large pressure and thereby adding further fuel to the present burning risk aversion fire. Glancing at the Scandinavian currencies, NOK and SEK, they as well have been victims in the ongoing nervousness, and both EUR/NOK and EUR/SEK are flirting with important levels. Key data out of Norway and Sweden to watch today are Norwegian August CPI and Swedish industrial production.

Worth mentioning is that the oil prices declined about 3 % in New York trading on the back of OPEC, bringing Brent Crude oil below USD 100 for the first time since April. Watch out – the ride is far from over!

Emerging Markets

By the Emerging Markets Team

Markets didn’t take long to turn around again

It did not take long for markets to turn around from the euphoria following President Bush’s rescue plan. Negative stock markets in Europe and the US yesterday dragged EM along and almost all EM currencies ended the day weaker against EUR. Once again ISK was the clear underperformer and we are slowly approaching 130 in EURISK, hence the cross has broken through the upper limit of our interval. For now putting a direction on EURISK seems to be a 50-50 bet. For now we maintain a neutral stance and adjust the interval. It will be interesting to see if Sedlabanki has any reactions on the monetary policy meeting tomorrow. For now we expect the rate to be left on hold at 15.50 %, but a hike would provide much needed support to the currency. Yesterday’s outperformers were the Central- and Eastern European currencies but only marginally firmer. In Turkey the central bank released its bi-weekly inflation expectations survey which showed decent drops in both expectations for end 2008 and 12 months ahead. This could provide support to the recent more dovish stance by the CBRT, but we still think that cuts in the key rate will only be a reality some time in to 2009. Today Q2 GDP is released and a number lower than expected could push to market speculations that cuts in the key rate are not too far away. Asian stock markets are in negative territory this morning and it seems that we could be up for another day of EM underperformance.

Today’s Key Events

• 09:00 ECB’s Trichet speaks
  

• 09:00 CPI, Romania
  

• 09:00 Q2 GDP, Turkey
  

• 10:00 CPI, Norway
  

• 13:00 MBA Mortage Applications, US
  

• 14:00 Q2 GDP, Brazil
  

• 23:00 Rate announcement, New Zealand
  

• 23:00 Rate announcement, Brazil

• Download Full Daily Forex Commentary

Published on  Wed, Sep 10 2008, 09:15 GMT