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

• Send
• Print
• Add To
• Rss

Daily Forex Commentary

54dfeeb8-e977-4a67-a8e9-d6992c9592c1

0

0

Not a Positive Day in Sight

Thu, Sep 18 2008, 06:20 GMT
by Jyske Bank Team

Jyske Bank

Today’s comment

Majors & Scandies

By the Majors & Scandis Team

We were witnesses to a European session with a relatively positive undertone, however, that sentiment vanished quickly when the Americans started hitting the numbers on their keyboards. Stocks went into negative territory, JPY and CHF rebounded versus both the dollar and the euro and as did the euro versus the dollar. NASDAQ and S&P500 closed down almost 5%, which does not happen very often.
The TED spread (3-month USD Libor vs. 3- month T-bill) is at levels almost twice as high as during the EMS crisis in ’92-‘93, LTCM ’98, and the Bear Stearns situation in the spring (current level ~300bps). Credit spreads illustrated by Libor fixings vs. OIS (short interest rate swaps) have blown out – especially in USD, but GBP has also been hit. In USD, 1-week spread is currently at more that 250bps while 3-month spread it “just” close to 150bps and this should be compared with the 7-8 bps (for both spreads) before the crisis. As a consequence of the highly unusual situation in the financial markets, we have decided not to put any new recommendations on the list at present. However, to give an arrow of direction in the market for developed FX, we have widened the ranges in the side in which the currency pairs are most likely to be heading.
Hence, lots of updates in the “Majors FX space”.

Only one thing left to say – good luck and manage your positions carefully.

Emerging Markets

By the Emerging Markets Team

Fear, distrust and outright panic continues to dominate financial markets, with widespread closing of positions hitting EM currencies hard - and hitting the popular stories the hardest, simply because that's where there are most positions to close. So far, the authority response has been peicemeal and uncoordinated, and it is an understatement to say, that markets have been far from impressed. Pumping out liquidity and sweeping up the remains of failed institutions quite simply is not enough at the current juncture, and we really need something more comprehensive and coordinated. Until such a step emerges, it is hard to envisage sentiment turning around, and we thus sell both the ISK and the TRY today (we are already short the ZAR). The ISK is obviously one of the (if not the) most vulnerable currencies in times of worries over financial institutions (and the 5-year CDS spreads of the Icelandic banks hit new highs yesterday), while the TRY, one of the most popular EM stories for a long period, is vulnerable through being a crowded long.
Today's central bank meeting is unlikely to alter the fate of the TRY, which is wholly in the hands of global sentiment. Having said that, a rate cut would be the wrong signal to send, not only because inflation remains high but also due to the nervous state of the global investor.
We look for rates to be kept unchanged at 16.75%.

Today’s Key Events

• N/A ECB meeting – No Rate Announcement Scheduled, EUR

• 14:00 Rate Announcement SNB, CHF

• 16:00 Philly Fed, USD

• 18:00 Rate Announcement Central Bank of Turkey, TRY

• 00:45 Current Account Balance, NZD

• 07:00 Leading Indicator, JPY

• Download Full Daily Forex Commentary

Published on  Thu, Sep 18 2008, 06:27 GMT