FX & Money Markets Daily: What A Market…
Today's Comment
Majors & Scandies
One thing is for sure at the moment - the interest rate market is not boring! Four numbers: 55, 45, 38, and 20 - that are approximately the number of basis points the 2-year US Treasury rate, and the implied rates by the Eurodollar June 09 future, the Short Sterling June 09 future, and the Euribor June 09 future respectfully went up yesterday! How often does that come along? The Fed's Bernanke spoke yesterday about inflation and the central bank's inflation focus. Bernanke stressed that the latest round of increasing energy prices have added to inflation and inflation risks on the upside. Anchoring inflation expectations has become a more dominant theme in the FOMC policy and Bernanke almost sounded 'Trichet-ish' at the Boston Fed conference yesterday. At the same time Bernanke said that the risks that the US economy will be hit by a substantial downturn have diminished during the last month. Overall, the statement from Bernanke yesterday and the events Thursday and Friday have introduced an enormous amount of volatility in the interest rate market.
With the current inflation focus in the market and with the CPI release from Norway today, there is a high risk that in the case of an upside surprise in the inflation data from Norway, EURNOK (NOKDKK) will come under significant pressure. We therefore recommend taking profit on bought EURNOK (sold NOKDKK) positions.
Emerging Markets
Following a stormy end to last week, Monday was somewhat calmer (at least for currencies and stocks) and most EM currencies took advantage of the calm to rebound. The TRY in particular managed to stage an impressive comeback, although this was partly driven by the drop in EUR/USD. But once again, the TRY proves to be remarkably resillient to bad news, and our long EUR/TRY recommendation proved to be a short-lived joy. While it could be argued that we were too late coming to that party, this does not alter our view on the vulnerability of the TRY at the current juncture. While positive (or at least non-negative) financial markets and a bit of calm on the domestic front obviously provided a solid background for a TRY rebound following a 5 % decline Thursday-Friday, the risk of more bad news - be it economic, financial or political - remains highly elevated, and going long the TRY at the current juncture does not seem to offer good risk reward. Looking ahead, the day does not offer much by the way of promising data releases in EM or elsewhere, and markets are left to contemplate what exactly has happened to interest rates since yesterday morning, with EM rates following a 50bps surge in the 2-year treasury note - and perhaps take a closer look at what Bernanke actually said overnight.
Today's key events
- N/A Several speeches from Fed members during the day
- 09:30 Consumer Prices, SEK
- 09:30 Consumer Prices, DKK
- 10:00 Consumer Prices, NOK
- 10:30 Industrial Production, GBP
- 14:30 Trade Balance, USD
- 15:00 Rate Announcement from Bank of Canada, CAD
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.
|
