Share this
Twitter
Myspace
Digg
Del.icio.us
Reddit
Furl
Yahoo
Technorati
Googlize this
Facebook
Hear this text
Print
E-mail
Forex Market Update: Risk Takes A Tumble Amid Growing Concerns About Greek Rescue Prospects
Bernanke on the stage again tonight….
HEADLINES - PREVIOUS SESSION
- US Jan. New Home Sales out at 309k vs. 354k expected and revised 348k prior
- US Jan. New Home Sales out at -11.2% m/m vs. 3.5% expected and revised -3.9% prior
- AU Dec. Conference Board Leading Index out at 0.6% vs. -0.3% prior
- AU Q4 Private Capital Expenditure out at +5.5% vs. +2.0% expected and revised -5.2% prior
- NZ Jan. M3 Money Supply out at -4.5% y/y vs. -1.1% prior
- NZ NBNZ Feb. Business Confidence out at 50.1 vs. 38.5 prior
THEMES TO WATCH - UPCOMING SESSION
- Sweden Confidence Indicators (0815)
- Swiss Employment (0815)
- HK Trade Data (0830)
- Sweden PPI (0830)
- GE Unemployment Rate (0855)
- EU Euro-zone M3 Money Supply (0900)
- Norway Unemployment (0900)
- UK BOE's King to speak (0930)
- UK Total Business Investment (0930)
- EU Euro-zone Confidence Indicators (1000)
- UK CBI Distributive Trades Survey (1100)
- US Fed's Pianalto to speak (1315)
- US Durable Goods Orders (1330)
- US Initial Jobless Claims (1330)
- US Bernanke to testify before Senate (1400)
- US House Price Index (1500)
Market Comments
In his testimony before Congress, Fed chief Bernanke stuck to the 'low rates for an extended period' theme and preserved the relatively dovish rhetoric that has been emanating from Fed speakers since the discount rate hike last week. In the details of his testimony, Bernanke noted that 'private final demand does seem to be growing at a moderate pace' although acknowledged that some of the turnover may be short-lived as a result of stimulus and inventory re-build. He reiterated that the jobs market remains 'quite weak' and inflation would remain subdued for some time due to the slack in the economy.'
Risk attempted a rally after the testimony, boosted by the low rates sentiment, despite some extremely weak data releases out of the US. New home sales hit a record low in January, managing just 309k sales despite the extension of the government tax credit scheme. Towards the close of the session, ratings agency S&P was quoted on the wires that a further downgrade of Greece's credit rating by one or two notches was possible within a month. This took the shine off risk and pulled EURUSD back from the day's highs to close barely changed. Later Moody's joined in the fray saying Greece risks a downgrade if it fails to meet the objectives in its fiscal reduction plan.
With risk on the retreat, it did not take much to push it over the edge and that came in the form of a UK Telegraph report that Greece's Deputy Prime Minister had launched a scathing attack on Germany and as a consequence risks putting the skids under any rescue package. EUR fell back through 1.35 and other risk pairs followed suit with notable JPY-cross selling spotted in heavy volumes.
Contrary to the weak data releases elsewhere, the Australian economy would appear to continue to power ahead as capital expenditure in Q4 exploded. Expenditure rose a strong 5.5% q/q versus 1.5% expected and investment intentions were also strong with companies increasing their expenditure projections on 2009/10. This was a focus of recent RBA commentaries where it was cited as a reason for reticence in raising rates further. Maybe this has now changed and, as we look to the RBA meeting next week, a 25bp rate hike may be on the cards. Interest rate markets are currently pricing in approximately 14bp worth of hikes next week. Despite the strong data, and predictions from RBA-watcher McCrann of a rate hike next week, AUD was unable to register gains with the weight of negative sentiment too heavy. AUDJPY slumped below 80.0 but and managed to take out the 200-day MA at 79.65 at the second attempt.
The data calendar hots up in Europe with Sweden's confidence indicators and PPI together with Swiss employment data starting the session. More unemployment numbers from Germany and Norway accompany Euro-zone money supply numbers while Euro-zone confidence surveys close off the session. In the US we see durable goods, initial jobless claims and house price index while Fed's Bernanke embarks on the second stage of his testimony before the Senate. Once again, it will be the Q&A session that is more likely to provide the excitement.
Analysis Disclosure & Disclaimer
SaxBank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by SaxBank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis dnot occur as anticipated.
SaxBank utilizes financial information providers and information from such providers may form the basis for an analysis. SaxBank accepts nresponsibility for the accuracy or completeness of any information herein contained.
Any recommendations and other comments in SaxBanks analysis derive from objective fundamental macreconomical and company specific calculations, statistical and technical analysis, and subjective general market assessment.
If an analysis contains recommendations tbuy or sell a specific financial instrument, such recommendation should be seen as SaxBanks opinion that the specific instrument will respectively outperform the relevant market or underperform compared tthe market. SaxBanks recommendations should statistically correspond tan even distribution between buy and sell recommendations.
The recommendations may expire promptly due tmarket volatility and in general, SaxBank does not anticipate its recommendations tbe valid more than one month. An analysis will be updated if and only if a market development or other issues relevant tthe analysis render a new analysis on the same topic relevant. SaxBanks analysis does not cover any specific financial product over time but only products which SaxBanks strategy team finds it important tcover at any given point in time.
In order tprevent conflicts of interest, SaxBank has established appropriate business procedures, incl. procedures applicable tresearch and analysis tensure objective research reports. SaxBanks research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis.
SaxBank is under supervision by the Danish Financial Supervisory Authority. SaxBank does not engage in corporate finance activities and accordingly, SaxBanks employees, incl. the persons responsible for an analysis, dnot receive remuneration associated with investment banking transactions.
