Nomura on EUR/USD: Back in early September

Good Morning,

- The euro dipped to $1.2613, its lowest level in more than two weeks as rumors talks for many European banks may fail stress tests.

- Asian shares: Japan's Nikkei -0.37%, Hong Kong's Hang Seng -0.60% (07:15 GMT), Korea's Kospi -0.27%, Australia's ASX 200 -0.06% and China's Shanghai -1.04%.

- Some European banks may fail stress tests by the ECB, the outcome of which is due on Sunday. Spanish news agency EFE, citing unnamed financial sources, said 11 banks were set to fail.

- The ECB, which will publish the test outcomes for 130 banks on Sunday, said final results had not yet been sent to the lenders involved, and it could not comment on individual institutions.

- The dollar index trade up to 85.808.

- Nomura on EUR/USD: Back in early September, Nomura cut its EUR/USD forecasts to 1.27 for end of September and end of Q4. Today, Nomura cuts again its Q4 target for EUR/USD from 1.27 to 1.24. For 2015, Nomura forecast are unchanged continuing to target 1.20 by Q2 2015. Nomura highlights six specific pieces of negative news, which all point to further downside for EUR/USD in the final months of 2014. 1) Fixed Income Portfolio Flows are Weakening. 2) M&A pipeline shifting to Euro negative Corporate FX flow, linked to M&A, has shifted to a clearly negative direction for the Euro. 3) Risk aversion and portfolio rebalancing failed to support the Euro substantially early in Q4. 4) The ECB is considering further balance sheet expansion. 5) Economic data have weakened substantially. 6) Financial stability risks highlighted again Eurozone peripheral spreads widened notably last week. "All told, we are revising our Q4 target for EURUSD to 1.24 from 1.27. In addition, we are tweaking EURCHF down to 1.21 from 1.22 for year-end 2014," Nomura projects.

- IMF urges Japan to go ahead with planned tax hike next year. Japan should go ahead with a second sales tax hike next year in order to maintain credibility of its fiscal framework, an International Monetary Fund official said on Thursday. "Going ahead with the tax (hike) is very important," said Roberto Guimaraes-Filho, deputy division chief. Speaking at a seminar, the official said the IMF expects Japan's economy to grow by an annualized 3.4 percent in July-September, rebounding from the deepest slump since the 2009 global financial crisis in the previous quarter after April's tax hike.

- The Chinese economy cooling to its weakest in over five years in the third quarter. The flash HSBC/Markit manufacturing purchasing managers' index (PMI) edged up to 50.4 from a final reading of 50.2 in September, just a hair's breadth from the 50.3 reading forecast by analysts. But the level of output in factories fell to a five-month low of 50.7, just above the 50-point level that separates growth from contraction on a monthly basis, pointing to a still-shaky economy.

- Oil prices on Wednesday flirted near multi-year lows hit last week, after data showed a second consecutive weekly jump in U.S. crude stockpiles. The U.S. Energy Information Administration said crude stocks rose by 7.11 million barrels, more than double the 2.7 million barrel increase analysts had expected.

- The New Zealand dollar slid to $0.7831 in the wake of softer-than expected inflation data that could give the Reserve Bank of New Zealand room to further delay its next interest rate hike.

- Watch today: German manufacturing, US jobs, US output.

Have a nice Day !