Today’s Comment
In Germany exports have grown much stronger in recent months while imports were on the decline. Most likely this meant a reduction of inventories. This situation will hardly last and therefore we expect imports to increase again. We do not think exports will continue to show as strong a trend as the one we have seen in recent months, and we expect slightly lower or unchanged exports. In Japan, volatile machine order fell by no less than 11.3% m/m in November, and hence the stabilisation over the past six months now seems less certain. This gives rise to concern as machine orders indicate the development of important business investments. We expect that machine orders will stabilise in future and after the steep fall in November we assess that machine orders rose quite substantially in December.
We upgrade our 1-month forecast for the yen. Therefore we revise down EUR/JPY to 120 (previously 131) and JPY/DKK up to 6.21 (5.68). Given the development in recent months and the breach of the technically strong levels at 126.95 and 124.35, it seems we are heading for lower levels. The problems relating to Greece have now been in the news for almost two months, and in recent weeks they have created a sour sentiment in the markets.
Also, the market is beginning to focus on difficulties in Portugal and Spain, among other places, and we are seeing a risk that the debt problems in Southern Europe may still be a significant theme in the FX markets until the ECOFIN meeting. However, we think the predominantly negative sentiment that we have seen in the market in recent weeks will prevail for some time to come.
Therefore we do not think the probability of seeing a brief rally and that EUR/JPY will reach 131 (JPY/DKK 5.68) within 1 month is high; rather we see the risk on the upside of the yen under current market conditions.
Today’s Key Events
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08:00 Trade balance (DEM)
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10:30 Trade balance (GBP)
Monday night
- 00:50:00 Machinery orders (JPY)
Today’s Chart – EUR/JPY
