Video

#SaxoStrats
Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 27 April 2017 at 12:02 GMT

Mid-session Europe: SEK tumbles on dovish Riksbank

Saxo Markets
Denmark

t


k

European bourses are lower ahead of the European Central Bank's latest policy announcement, but the expected steady course will likely do little to change the trend. At present, equities are caught in the wake of US president Trump's failure to cheer Wall Street with the tax plan outlines released Wednesday; with little expected from the ECB, it may be down to leading French centrist Emmanuel Macron to spark a risk bounce in Europe (as he has already done in bond markets).

The Mexican peso and Canadian dollar rebounded strongly after Trump stated that he would not pull the US out of Nafta, but the free trade-sceptical administration has not ruled out such a move in future.

Meanwhile, Deutsche Bank shares are tumbling despite a leap in profits and Sweden's Riksbank has left its repo rate unchanged at minus 0.50% as expected but provided more a dovish commentary than anticipated, extending QE and pushing out inflation forecasts.

Watchlist

  • US March Adv.Goods Trade Balance (1230 GMT) 
  • US March Prelim.Durable Goods orders (1230 GMT) 
  • ECB Draghi press conference (1230 GMT) 
  • US March Pending Home Sales (1400 GMT)
         
v
Forex developments

Markets have seen muted trading in the first half of the European FX session with all eyes focused on the upcoming ECB Rate Announcement at 1145 GMT. 

EURUSD is mainly unmoved near the 1.09 area, maintaining well above its 200-day moving averafe, which mirrors the USD index staying below both its 200-day EMA and local resistance at around 99.00.
 
One of the key movers so far is EURSEK adding around 1% and trading near the 9.65 level on a surprisingly dovish Riksbank outing.

USDJPY is rangebound in between its 200-day and 100-day EMAs at 111 and 111.5 respectively. 

GBP: Cable traded on the bid and is currently attempting to breach above 1.29, representing an 0.4% daily gain.

FX Options volatilities
 
h

The news overnight was Trump’s tax proposal and his statement on agreeing not to break up the Nafta deal “for the time being”. There was very limited reaction to the tax proposal, but also no bigger volatility was priced in for this event. On Nafta, USDMXN and USDCAD vols traded higher ahead of his statement, but went down again on the announcement.

EURSEK overnight was trading at 15 vols ahead of today’s Riksbank meeting, implying a 0.8% expected range which spot has delivered.

In EURUSD, we have the ECB today and there is some uncertainty weather it will be more hawkish now that worries of a French Le Pen victory have abated. 

We therefore also see a heavy risk-reversal skew for EUR calls ahead of today’s meeting. 

Fixed income
n

Commodities

j

d
Equities

h


European stocks fell Thursday with Deutsche Bank falling despite a leap in profit as investors waited for a policy update from the European Central Bank. The outline of Trump’s plan for tax cuts and changes also lacked detail, a negative signal for investors.

The Dax 30 fell 0.3% to 12,433, the CAC 40 lost 0.4% at 5,266 and the FTSE 100 gave up 0.5% to 7,241.

No sector traded higher, with oil and gas, consumer goods, and utility shares logging the biggest losses.

Deutsche Bank shares dropped 3% after the German lending heavyweight’s profit doubled in the first quarter, but revenue came in roughly flat when adjusted for the impact of credit spreads.

Lloyds Banking leapt 3.8%, its best session since February 22. The lender said first-quarter net profit surged to £766 million from £405 million a year earlier, aided by a decline in bad loans. The UK government, which bailed out Lloyds during the financial crisis, is expected to sell its remaining shares in the bank in the coming months

Deutsche Lufthansa shares were down 1.7% after the airline group swung to a first-quarter operating profit of 25 million euros ($27.3 million). The airline group earlier this month said ticket pricing was more positive on a currency-adjusted basis.

Bayer shares were up 3.1% after the German pharmaceuticals and chemicals maker reported a 38% jump in net profit for the first quarter and raised its outlook for the full year.

WPP fell 1.9% after the world’s largest advertising company said revenue growth slowed in the first quarter as clients spent less in the U.S. and emerging markets.

AstraZeneca fell 1.1% after the drug maker said first-quarter profit declined 17% to $537 million as it battles declining sales of its blockbuster cholesterol pill Crestor.

Latest and still open trades on #SaxoStrats

The replay of our Morning Call can be found here.

Join our Weekly OptionsLab on Wednesday  to find out more on covered call strategy.

Read more

Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.





Stockholm
Sweden's central bank surprised to the dovish side today; next up is the ECB.
Photo: Shutterstock

— Edited by Michael McKenna

The Global Sales Trading desk is a multi-asset team providing customised trading solutions

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail