Forex
31 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Currency market trying to set off a few fireworks to end the decade as JPY tanks and GBP rallies. The USD has weakened a bit on the yield implications of strong Treasury auction results, but a stream of stronger data still provide fuel for the USDJPY rally at the shorter end of the curve. Will the beginning of a New Year provide a pivot point for currencies?
28 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Chinese premier underlines commitment to weak yuan. USD seems to be ignoring the favorable development in yield spreads over the last few sessions. Beware the potential for calendar year rollover effect with only three trading days left in 2009.
23 December 2009
John J. Hardy, FX Consultant, Saxo Bank
US Bonds rallied a bit after muted PCE data from the US, taking the USD a bit lower. The BoE minutes show the MPC in a holding pattern, with the market apparently interpreting them as fairly sterling-bearish. The next two trading days after likely to offer little in the way of volatility, though there are a few items on the economic calendar.
23 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
US Existing Home Sales surprised to the upside; today we New Home Sales are released and we expect a flat number. The most important data event is BoE minutes.
23 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The firmer dollar train continues to roll along, unshaken by some worse than expected revisions to US growth numbers in Q3. The USD index rallied to a near 4-month peak even though Q3 growth was adjusted lower to +2.2% q/q from +2.8% at the previous estimate. However, later the dollar’s rally could be reasoned from a strong showing in existing home sales in November which came in at +7.4% m/m versus +2.5% expected
22 December 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The third revision of the Q3 US GDP came out below expectations. Here's a breakdown of the contributions from each of the sections. Nearly all of the broad headings were revised down, with the exception of Government Consumption Expenditures And Gross Investment. Within the main headings, private consumption made the biggest contributions to growth in GDP, while the construction of non-residential properties, as expected, pulled the account down.
22 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Spiking US bond yields saw the USD extending its rally in Europe today, but a hefty downward adjustment in US GDP sees the USD on shakier footing as we head into the New York equity session. Is the USD strength getting overextended? Poor Japanese confidence data and higher government bond yields weigh on the JPY.
22 December 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The latest revision of US Q3 GDP, now renamed 'third' instead of 'final', is out at 13:30 GMT today. Little is expected to change in the headline figure, which should come in around 2.7%.
22 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Third estimate US GDP is not likely to move the markets, but the Existing Home Sales might surprise positively and lead stocks higher. We are still close to the 1121 level in S&P500 and it still hasn’t been tested.
22 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
Firmer US yields gave the greenback another lift during the US session yesterday, despite a solid rally on Wall St near to the year’s highs implying a further breakdown in the correlation between a firmer dollar and risk appetite – at least for now.
21 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Christmas week not normally a week for significant volatility, but we have a fairly interesting calendar this week and the following two weeks are often seasonally critical for currencies.
21 December 2009
Ole S Hansen, Senior Manager, Saxo Bank
The dollar continued to strengthen reaching the highest level in three months and in the process triggering additional profit taking among some commodities. The move has been driven by a combination of year end position squaring, a more upbeat tone from the U.S. Federal Reserve Bank and not least the cut in Greece’s credit rating.
21 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The US dollar index continues from where it left off on Friday (higher). Corporate CDS prices are unchanged. We look for continued profit-taking in equities today and have a “sell at the break” stance.
21 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
With a barren data slate in the US it was left to the remnants of sentiment/orders from Europe and Asia to dictate moves into the close on Friday. Basically we saw an extension of the underlying theme with the JPY suffering following the BOJ’s commitment to ”not tolerate deflation”. On the flip side, CHF continued to strengthen as the SNB appeared to walk away from defending the absolute 1.50 level.
18 December 2009
John J. Hardy, FX Consultant, Saxo Bank
The Bank of Japan made a strong statement on deflation, but with no specific actions outlined. JPY crosses rallied strongly on the news after a bizarre run to the downside ahead of the meeting. Brave new CHF longs test the waters below 1.5000 - where will the SNB make its presence felt?
18 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
No important data in the US session today, but IFO in the European session could move the markets. It looks like the negative correlation between the dollar and stocks is back, so we have a sell on rallies stance today
18 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The dollar’s resurgence continued overnight, albeit at a slower pace than was witnessed in Asia yesterday. The dollar index hit 77.94, its highest in over 3 months, with gains secured across the board. EUR continued to sag with Greece’s debt situation a constant drag and reference to a German newspaper saying S&P was reviewing the rating for about €1500 bln of EUR bonds, a bad scenario for covered bonds which have up to now been rated AAA. Nevertheless EUR found at least temporary support close to 1.43.
17 December 2009
John J. Hardy, FX Consultant, Saxo Bank
USD finds a temporary peak in the NY session and JPY crosses remain very nervous ahead of the Bank of Japan meeting in Asia's Friday session. Today we look at how the market is pricing EURUSD relative to US vs. German interest rate spreads.
17 December 2009
John J. Hardy, FX Consultant, Saxo Bank
USD strength continues into Europe today as major resistance levels gave way. Is there more room for USD strength? Also, a key Bank of Japan meeting tonight as the market frets a possible deeper move by the Bank into easier monetary policy.
17 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The FOMC once again promised to keep rates exceptionally low for an extended period of time, strengthening the dollar.
17 December 2009
Andrew Arnold, Trading Floor Editor
Saxo Bank has today released its annual "Outrageous Claims", this year predicting devaluation of the CNY, the emergence of a third political party in the US, a massive fall in the price of sugar, a positive US trade balance for the first time since the 1975 oil crisis, and that the US Social Security Trust Fund will go bust.
17 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
There was very little market-moving announcements from the Fed last night with conditions still warranting “exceptionally low levels of interest rates for some time”. The assessment of the economy showed a marginal improvement in that the deterioration of the labour market was abating but more markedly the Fed announced specific timelines for the withdrawal of its special liquidity facilities.
16 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Our quick and dirty analysis of the Fed's new statement, which continues to show the Fed moving ahead with an even firmer timetable of the withdrawal of its special liquidity facilities and programs.
16 December 2009
John J. Hardy, FX Consultant, Saxo Bank
All eyes on FOMC later today, but curious goings on in the fundamentals that affect EURJPY as well, as we point out in this article.
16 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Australian GDP knocks Aussie for further losses. Interesting contrast in Scandinavia with Norges Bank and Riksbank rate meetings, as NOK rallies on unexpected hike while the Swedes take it easy for now – albeit with dissent in the ranks. FOMC on tap – Fed to maintain an even strain?
16 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The USD is finding buyers again and the downsloping trend is in danger. That means that stocks could be on the retreat again although the uptrend in stocks is intact (still).
16 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The dollar continued its rally during yesterday’s session and ahead of the FOMC meeting announcement early tomorrow morning. Its gains were again most pronounced against the EUR with a number of factors also pressuring the EUR to 2-1/2 month lows. Notwithstanding the data – ZEW surveys were weak in Europe and US PPI jumped surprisingly – talk circulated about the indebtedness of Austrian banks and possible nationalizations (note the difference with the US financial sector where US banks are repaying emergency funds yet problems are only just surfacing (or being revealed!) in the European sector).
15 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Today we have a look at a number of USD charts. There seems to be a common theme: we are at a very big inflection point here ahead of the FOMC meeting tomorrow. Read on for more....
15 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Risk appetite's influence on FX continues to wane at the moment as relative moves in interest rates become the driver ahead of the week's most important event risk, tomorrow's FOMC meeting. RBA minutes push Aussie even lower as rate trajectory is lowered once again.
15 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
A quiet Monday is followed by a busy Tuesday in terms of macro data. Besides the data mentioned below, watch out for various UK price indices at (GMT) 09:30 and US TIC Flows at 14:00.
15 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The news from Dubai was enough to promote a bout of risk appetite yesterday as Abu Dhabi agreed to pump $10 bln into the real estate black hole of Dubai World thereby alleviating pressing concerns about default on scheduled debt payments and buying time to renegotiate terms of other debt. The reaction in currency markets was more-or-less as expected, though the impact proved not to be particularly long-lasting.
14 December 2009
John J. Hardy, FX Consultant, Saxo Bank
The USD and risk appetite continue to find little in common after a curious week of non-correlation. How long will this persist? Interesting technical setup for GBPUSD. JPY stronger on Tankan, but will it last?
14 December 2009
Ole S Hansen, Senior Manager, Saxo Bank
End of year position squaring has begun with some commodity markets suffering heavy losses. It all kicked off last Friday as US unemployment surprised the market by being better than expected. The chain reaction that followed led to a dramatic reversal in commodities with a strengthening dollar being the main catalyst for the move.
14 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Abu Dhabi has pledged $10bn to the state-owned Dubai World to help the company meet its obligations. Risk appetite increased on the news and stock futures are up.
14 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
All eyes were fixed on the US retail sales data on Friday – and they did not disappoint. Retail sales was among a trio of stronger than expected US data releases that ensured the dollar had a good day on Friday, with expectations resurfacing that the Fed’s hiking phase would be brought forward rather than delayed.
11 December 2009
John J. Hardy, FX Consultant, Saxo Bank
USD stronger after a relatively strong (though far less strong than headlines suggest) retail sales number. Risk appetite still seems to hold the key for the USD. We are likely to move out of the recent very tight ranges in key USD pairs here ahead of the weekend.The JPY was sharply weaker after the US data as bonds sold off.
11 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
A turnaround is brewing in most asset classes and markets are again embracing risk, full-throttle – helped by rather decent Chinese growth and industrial production figures overnight.
11 December 2009
Mads Koefoed, Macro Strategist, Saxo Bank
US Advance Retail Sales for November out later today (13:30 GMT) are expected to bring some Christmas cheer to the markets with the fourth monthly increase in a row. But the expected 0.7% (consensus: 0.6%) increase in the monthly headline figure underlines that the recovery in the retail sector isn't going to be a speedy one.
11 December 2009
John J. Hardy, FX Consultant, Saxo Bank
JPY action heating up again as US interest rates press up against important resistance level. Will the dam break? In other news, the pound bolstered overnight as Moody's promises no revision on AAA credit rating for now. Action may be sluggish ahead of US Advance Retail Sales data for November later today.
10 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Watching paint dry is far more interesting than watching market action like today's. Tomorrow is not likely to be as boring, with important US data and with key USD resistance thresholds we've been mentioning lately still in in tact, but under duress at times in the last couple of sessions.
10 December 2009
John J. Hardy, FX Consultant, Saxo Bank
An update of our carry trade model shows relatively benign risk conditions over the last couple of days, but little response in our sample carry trade basket.
10 December 2009
John J. Hardy, FX Consultant, Saxo Bank
The BoE left well enough alone today, providing no trigger for a strong directional move. The SNB hinted at relaxed vigilance, but the market doesn’t seem to be listening just yet. US data was mixed. As the US session opens, the risk bulls are pressing important envelopes of resistance across markets.
10 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Much better than expected employment data from Australia caused the AUD to rally overnight. Additionally, the S&P 500 staged a comeback in the US session, but we are nevertheless negative on risk today. Watch out for the weekly employment data from the US. Initial jobless claims could disappoint the market, which is expecting a 2K fall in claims, today.
10 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Aussie rallies on yet another strong employment report from Down Under. BoE rate announcement on tap later with the focus on whether the bank will fiddle with QE measures once again or leave well enough alone. SNB is also on tap later. Elsewhere, EURUSD remains relatively weak as the market can't decide whether it's risk on or risk off at present.
09 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Market pumps up the kiwi after Bollard's mild words on the currency's strength and outlook for a rate move in mid-2010. Elsewhere, CAD rallies sharply despite huge drop in oil prices after the US weekly crude and product inventories.
09 December 2009
John J. Hardy, FX Consultant, Saxo Bank
A mild consolidation in the strong USD move in Europe today that seems to be fading as we transition to the NY session. GBP and GBPUSD in sharp back on forth on Dubai situation and the pre-budget report from Darling and company. JPY crosses await US 10-year treasury auction results.
09 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
A strengthening dollar seems to confirm the negative correlation break-down from Friday and suggests that USD bulls have more to hope for in the short term.
09 December 2009
John J. Hardy, FX Consultant, Saxo Bank
The USD continues to grind strong versus the market. So far the moves in currencies have outpaced the moves in equity markets in terms of volatility. Real fireworks may lie ahead if risk inputs into the market gain further momentum from here as signs of risk nervousness are cropping up. The likes of AUD, NZD and CAD could be the most vulnerable in a "mini-meltdown" scenario.
08 December 2009
John J. Hardy, FX Consultant, Saxo Bank
USD and JPY continue to press against the rest of the G-10 as the Euro and especially Euro "satellites" flail around for support. CAD was on the move back to the downside after the BoC again confirmed its stance on keeping rates unchanged for now and complaining about the strong currency.
08 December 2009
John J. Hardy, FX Consultant, Saxo Bank
The JPY has rocketed back higher as the “themes” generated by the strong US employment report on Friday proved an ephemeral mirage. Ugly action in Europe on the risk appetite front after a Fitch downgrade to Greek debt.
08 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Bernanke’s comments yesterday were decidedly bearish (“economy facing formidable headwinds” and “inflation remains subdued”), so the USD went lower.
07 December 2009
John J. Hardy, FX Consultant, Saxo Bank
The greenback follows up on last week's strength as weak USD shorts are stopped out and others look to play the technical breaks. Without support from risk aversion, many are beginning to ask whether this move suggests the end of the previous reflexive USD/risk appetite correlation. Too early to tell, of course, but interesting to weigh the evidence as events unfold.
07 December 2009
Ole S Hansen, Senior Manager, Saxo Bank
The global wave of risk reduction in the wake of the events in Dubai disappeared almost as quickly as it emerged. It did however highlight the risk of sovereign debt levels and it raised a few questions which the market will be looking for answers to as we head towards 2010.
The worrying thing that Dubai showed is how correlated the world has become and how easy one event can trigger a chain reaction across most asset classes. Something that is worth keeping in mind the last few weeks of 2009 as the risk of profit taking and thereby a short term reversal in markets cannot be ruled out.
07 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
With the JPY TWI under severe pressure and both sovereign and corporate CDS prices down, it looks like we could again have a risk-embracing environment, in which the USD strengthens.
04 December 2009
John J. Hardy, FX Consultant, Saxo Bank
A huge day for the USD - false dawn or sign of more to come? We look at the potential for a further USD move higher here in the short term. It is interesting to note that rate spreads seem to be mattering more today than they have in the recent past.
04 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Today's strong employment report appears to be the final nail in the coffin-lid of the USDJPY downtrend. Elsewhere, the gangbusters US employment report is a strong challenge to the idea that the USD should always sell-off on strong risk appetite appreciation, regardless of how good the US economic data points. The next few tradings days are likely to tell us whether we go back to the old theme or whether we are entering a new paradigm for FX
04 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
ISM Non-Manufacturing was sufficiently bad to spur a broad-based risk reduction. Since both sovereign and corporate CDS prices were down, we might see a bounce in risk ahead of the US labour market data. However, we believe that the labour market data will disappoint and that taking profit or going short ahead of the release is worth considering.
04 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
The main event overnight was the ECB meeting with rates left on hold with ECB Pres. Trichet saying that economic conditions are improving, but that the recovery would be "anemic" and that some factors supporting the recovery are temporary. Inflation prospects seem to be causing few worries, whether for the short or longer term. His overall comments were perhaps less hawkish on the surface than anticipated by the market
03 December 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The US Bureau of Labor Statistics is expected to announce tomorrow that Nonfarm Payrolls have fallen by 125,000 in November, according to most market commentators. This would mean a drop of 65,000 on October's 190,000 - a large drop by anyone's standards. We're slightly more pessimisstic, targeting a figure for the month of 139,000... For unemployment figures we're expecting 10.3%.
03 December 2009
Nick Beecroft, Senior Markets Consultant
So, as was always a possibility, the ECB announced that the terms of the 12-month repo operation will be changed to a variable rate, linked to the average rate at Main Financing Operations throughout the life of the repo-i.e. tied to demand. Also, no more 6-month operations after April 2010.
03 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Trichet making timeline clear for exit from largest ECB liquidity programs - but market seems to be shrugging the announcement off as it prefers to obsess about risk. Strong US claims derails bonds and JPY sees collateral damage as USDJPY jumps through structural resistance at 88.00. US ISM non-manufacturing up shortly is now the focus.
03 December 2009
Nick Beecroft, Senior Markets Consultant
It’s a very close call today, but my view is that the ECB will once again announce that the 1 yr repo to be conducted Dec 16 will once again be on the same full allotment at 1% basis as the previous two. They could possibly move to a floating rate tender, but i don’t expect to see a spread added to the 1% rate this time.
03 December 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The housing market has recovered well in the last couple of months in the US. In the Eurozone are still laying-off workers despite the recent improvements in the economy. While in Japan the newly announced JPY 10 trillion stimulus package underlines the poor state of the economy. Nevertheless, we expect industrial production to grow 0.7% in the revised November report while capacity utilisation should also climb somewhat higher.
03 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
With the USD edging lower vs. Gold, EUR, AUD and others, it looks like another day of risk-taking. Corporate bond spreads are narrow and CDS prices are easing. Bank of America is to repay all the $45B TARP – we expect this to be another positive today, as it indicates a stronger belief in the company’s cash-flows. The ECB will be talking interest rates today. Another trigger today will likely be Initial Jobless Claims reported for last week. Due to Thanksgiving, unemployed only had 3½ days to report, which should result in a lower than expected figure. ISM Non-Manufacturing might disappoint slightly, though – so take profit on longs ahead of ISM.
03 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
A relatively steady session overnight with the weak dollar theme again in evidence but slightly firmer US bond yields gave the dollar some respite into the close. Gold continued its path north, firmly establishing itself above the 1,200 mark, but oil took a bit of a knock on a larger than expected build in US inventories.
02 December 2009
John J. Hardy, FX Consultant, Saxo Bank
The action died down in today's US session, with only a bit of CAD weakness on oil roiling the market surface. Tomorrow should see a return of some volatility for EUR crosses with the ECB on tap.
02 December 2009
John J. Hardy, FX Consultant, Saxo Bank
US ADP number gives the bulls a bit of pause, but is there anything that can stand in the way of the market mentality of Liquidity is King at the moment? Focus now switching to tomorrow’s ECB meeting and US ISM Non-manufacturing.
02 December 2009
Nick Beecroft, Senior Markets Consultant
A talk by Adam Posen, Bank of England MPC member on ‘Finding the right tool for dealing with asset price booms’, gave an interesting insight into the thinking of probably the MPC’s foremost authority, and most influential voice, on this subject. He came down unequivocally against central banks attempting to burst asset price bubbles, whether equity or real estate, by using monetary policy.
02 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
Yesterday’s figures were mixed, but the Dubai debt restructuring has led to a 200 bps. drop in Dubai sovereign CDS prices in one day. In other words, the market sees no problem.We have a “Buy-On-Dips” stance today and believe that the S&P500 could break the 1114ish resistance to finally test the 1121 key Fibo resistance.
02 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
As the threat of a more catastrophic financial meltdown following the Dubai World debt problems seems to fade, so markets reverted back to embracing risk with a resultant rally in equity markets, softer bond markets and a weaker dollar overnight.
01 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Strong risk reboun continues and keeps pressure on the greenback. Market brushes aside the weak ISM and gold continues its daily record setting trajectory.
01 December 2009
John J. Hardy, FX Consultant, Saxo Bank
We have a look at how each of the G-10 currencies is faring against its G-10 brethren on a basket basis.
01 December 2009
David Karsbøl, Chief Economist, Saxo Bank
Our Asset Allocation Model is maintaining an "Outright Bullish" stance after having changed from "Outright Bearish" only three months ago. The reason is a sharp turnaround business activity (according to our Global Business Cycle Indicator) and that means that the overall allocation has changed and now recommends a bigger, net long (however moderate) position in equities and larger exposure to commodities.
01 December 2009
John J. Hardy, FX Consultant, Saxo Bank
Market trying to get back into the groove of the pre-Dubai rally in risk. USDCAD nearing key support and EURJPY trading at key resistance after BoJ moves to enhance liquidity.
01 December 2009
Mads Koefoed, Macro Strategist, Saxo Bank
The ISM Manufacturing Index is out today at 15:00 GMT and should give a good idea of whether the series of positive November indicators can continue.We are on the high side of consensus expectations - looking for 56.5 versus 55-7 in October.
03 December 2009
Andrew Arnold, Trading Floor Editor
There are so many economic indicators that keeping a solid grasp on the Forex market is difficult. Saxo Bank has gathered the most important into a new publication that gives a signpost to the development of the global economy
01 December 2009
David Karsbøl, Chief Economist, Saxo Bank
The Saxo Bank Fundamental FX Model returned 0.51% for the month of November and maintains a heavy allocation in AUD and NZD, funded by short positions in primarily GBP, USD and CAD. The allocation towards CHF, JPY, NOK and SEK increased slightly, but no big changes have made.
01 December 2009
Christian Blaabjerg, Chief Equity Strategist, Saxo Bank
The market is shrugging off all bad news from Dubai and seems to embrace risk today; a strong ISM should be the trigger. We have a buy-on-dips stance for equities and a more recalcitrant stance on FX.
01 December 2009
Andrew Robinson, FX Analyst, Saxo Capital Markets
A greater sense of calm surrounding the Dubai debt problem saw the familiar theme of a weaker dollar dominate activity overnight, with US bond markets little changed and Wall St managing to eke out marginal gains. Month-end factors largely proved to be a non-event this time round.
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