FX & Money Markets Daily: Strong Tailwind For NOK Ahead

Today's Comment

Majors & Scandies

Market sentiment turned sour yesterday and with the oil prices surging towards new highs near 130 USD per barrel sentiment remained bleak throughout the American trading session.

The outlook this morning is not all that positive as Asian stock markets are in the red and futures on European stock indices point towards a negative opening. Furthermore macro economic events could contribute to the sour mood among investors as the German Ifo index is due for release at 10:00 am. The index fell sharply in April but we expect that further weakness in the index lies ahead.

EURCHF dropped yesterday but so far the currency cross rate remains supported around the 21-day moving average (currently at 162.45). We have chosen to maintain a neutral stance as long as market sentiment remains mixed and technical analysis doesn't offer any clear cut signals in either direction.

The NOK has strengthened versus the EUR recently but yesterday the trend reversed and as stop loss orders were executed EURNOK hit a high at 786.75. This morning however the currency cross rate seems to be stabilizing and as we still believe in a stronger Norwegian currency we have chosen to maintain a selling recommendation at this point.

Yesterday the Danish central bank announced that it had sold foreign currency worth 10 billion DKK last week to support the Danish currency. With Friday's rate hike of 10 bps it looks as though Nationalbanken has succeeded in curbing the run on the DKK for now. Thus EURDKK has dropped over the past couple of days and is currently trading around 745.80. However if the pressure on the DKK picks up again and EURDKK revisits 746.15 investors will undoubtedly start speculating in further Danish rate hikes.

Emerging Markets

ZAR and TRY were the big losers yesterday. ZAR finished the day 2.5 % lower against EUR. TRY finished the day 1.6 % lower against EUR. ISK continues doing relatively well. However ISK was still affected by the negative market sentiment and dropped 0.9 % on the day. The hot topic right now is the increasing oil prices. Oil is at 129 USD per barrel, which trigger lower equity markets and weaker EM currencies in general. Over night equity markets have continued to drop in USA and Asia. We therefore expect a weak opening today. Keep an eye on PPI and core inflation from Poland. The data is published 2 pm and is only data from our focus countries today.

Today's key events

• 09:30 Unemployment (SEK)
• 10:00 GDP (NOK)
• 10:00 Ifo (DEM)
• 10:30 Minutes from monetary policy meeting in the BoE (GBP)
• 13:00 MBA Mortgage applications (USD)
• 13:00 Consumer prices (CAD)
• 14:00 Producer prices (PLN)
• 14:00 Industrial production (PLN)
• 19:00 Fed's Warsh speaks (USD)
• 20:00 Minutes from monetary policy meeting in the Fed (USD)
• 01:50 Activity index, industry (JPY)

Jyske Core Positions - Recommendations

Jyske Markets - FX Research
http://www.jyskebank.dk/finansnyt

The analysis is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor for transactions made on the basis of the information or the estimates of the analysis. The estimates and recommendation of the analysis may be changed without notice. The analysis is for personal use of Jyske Bank's customers and may not be copied.