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Daily FX Market Commentary

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FX markets very volatile overnight

Mon, Mar 30 2009, 06:08 GMT
by John Hydeskov

Danske Bank A/S

Today's key points

• S&P drops 2%, Nikkei drops 3%. FX markets very volatile overnight. GM's Wagoner sacked by US government. Industrial production in Japan declines as expected.

• Focus today: Thin data calendar; most important are UK mortgage approvals and euro area consumer confidence. G20 warm-up.

Markets Overnight

The S&P500 index fell 2% on Friday as lower oil and metal prices dragged down commodity producers and profit taking was seen in info tech and financials. Still the index managed to climb 6.2% on the week and is now up 21% from a 12-year low on 9 March which is the most in 14 days since 1938. The US yield curve was pushed a little lower as the 2Y note dropped 2bp to 0.89% while the yield on the 10Y note declined 4bp to 2.71%. All Asian stock indices have fallen overnight with the Nikkei225 and Hang Seng down 3%.

Lots of action in FX markets overnight with massive JPY strengthening while commodity currencies AUD and NZD have been under pressure. EUR/USD has fallen 0.5% to 1.3220 while EUR/GBP is unchanged at 0.93. EUR/SEK is 0.5% higher at 10.93 while EUR/NOK is 0.2% lower at 8.80. EUR/DKK is trading around 7.4488.

Data released overnight showed that Japanese industrial production took another dive in February by falling 9.4%, 0.3 percentage points worse than the consensus expectation. Stabilisation signs were, however, observed as the decline in shipments eased and inventories shrank for the second month in a row.

The chief executive of General Motors, Rick Wagoner, has resigned at the request of the White House. He will be replaced by Fritz Henderson, GM's chief operating officer. The US government plans to give GM enough aid to restructure over the next 60 days, while Chrysler has been told to complete a deal with Fiat, according to a government official. Also Christian Streiff was ousted on Sunday night as chief executive of Peugeot Citroen in a surprise boardroom coup.

G20 heads of state will meet this week in London. The agenda will be dominated by the simultaneous implosion of industrial activity and exports, the amount of fiscal stimulus needed to bring the global economy back on track, financial regulations, the future role of the IMF and perhaps also foreign reserve management. President Barack Obama said yesterday that leaders know they must "deliver a strong message of unity" for the sake of the global economy.

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Published on  Mon, Mar 30 2009, 06:12 GMT