Christin Tuxen
Danske Bank A/S
No weekend deal on US public finances. Policy makers are still in talks over both a temporary deal on raising the US debt ceiling and ending the partial government shutdown. On Sunday, talks in the Senate were the focal point and even though both parties sent positive signal, there are still no signs of an immediate resolution. This will likely continue to create market volatility until a deal is struck.
After posting the first weekly gains for a month USD is again lower this morning with JPY again among the biggest movers. Sentiment and positioning should be less stretched in EUR/USD than just a couple a weeks ago and with positive news from Ireland supporting the euro and US politics weighing on the dollar there should be potential for another move higher in EUR/USD.
Further set to support EUR is the continued compression in peripheral spreads. Not least Portugal and Italy have tightened versus Germany across the curve. Many issuers are closing in on their 2013 issuance targets and we are approaching very large coupon and redemption payments; over the next three weeks EUR70bn will be returned to investors. This will continue to underpin our view of further spread tightening going forward.
Note that as a result of the government shutdown again no IMM positioning data from the CFTC were released on Friday, leaving us largely in the dark on how the FX market has positioned itself over the past couple of weeks.
The Swedish krona might come under renewed pressure if the ‘low for longer’ case is further being priced in Sweden. The next target from a technical point of view is 8.90 for EUR/SEK. After a nine-year low was tested in NOK/SEK, we now think it is time to go against the trend and we recommend to buy the cross for a move towards the first target at 1.0895. We believe the market is in the process of pricing a more dismal outlook for Sweden, which is already priced for Norway. Relative core inflation supports the view that NOK/SEK is about to correct higher, see Scandi Markets Ahead: Low for longer in Scandinavia and value in long NOK/SEK to be published later today.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD hovers near 1.0700 even as USD struggles ahead of data
EUR/USD has erased gains to trade flat near 1.0700 in the European session on Thursday. The pair comes under pressure even as the US Dollar struggles, in the aftermath of the Fed policy announcements and ahead of more US employment data.
GBP/USD turns south toward 1.2500, US data eyed
GBP/USD is consolidating the rebound above 1.2500 in European trading on Thursday. The pair struggles, despite the US Dollar weakness on dovish Fed signals. A mixed market mood caps the GBP/USD upside ahead of mid-tier US data.
Gold price pulls back as market sentiment improves
The Gold price is trading in the $2,310s on Thursday after retracing about three-tenths of a percent on reduced safe-haven demand. Market sentiment is overall positive as Asian stocks on balance closed higher and Oil prices hover at seven-week lows.
Top 3 Price Prediction BTC, ETH, XRP: Altcoins to pump once BTC bottoms out, slow grind up for now
Bitcoin reclaiming above $59,200 would hint that BTC has already bottomed out, setting the tone for a run north. Ethereum holding above $2,900 keeps a bullish reversal pattern viable despite falling momentum. Ripple coils up for a move north as XRP bulls defend $0.5000.
Happy Apple day
Apple is due to report Q1 results today after the bell. Expectations are soft given that Apple’s Chinese business got a major hit in Q1 as competitors increased their market share against the giant Apple.