After a week of consolidation, the USD is ready to take another go. Which way?
Weaker NOK alongside rate cuts, SEK: It's all about weakness and the USD correction won’t last – flows support EUR. More on these stories in this edition of Global FX Strategy.
USD is raging after strong payrolls data...will Fed speakers cap the USD rally?
The ECB expectation adjustment has beaten the EUR down from overshooting mode, chance for a break?
There is room for more weakness in USD. But it won't give up without fight. Change in risk sentiment could benefit.
US default (expectations) may benefit USD....but this time is different in many ways.
The USD has hit the first line of support - ripe for a bounce? The GBP most vulnerable.
Potential turning points for EURUSD and GBPUSD? It ain't over until it's over. Politics ON.
This will likely be a consolidation week,with lots of central bank talk to introduce volatility. The USD will try to fight, but not run far against majors. Turning cautious on cyclicals/EMs.
A mini taper is consensus, softer forward guidance to bring USD lower. Still long GBP, EUR, JPY, AUD...against USD.
Tapering still on the table, but NFPs question the scale and timing - doubts against the USD. Data from China could lift AUD. USDJPY retesting triangle break-out, EURGBP aims at 0.8400 support.
The sell-off that started in the US has been supported by positive macro developments in other parts of the world. Still, central banks are likely to retain a dovish stance, while it will be increasingly difficult to meet the constantly rising expectations. More on this and other fixed income topics from EUR, USD and Nordic rate markets.
Another calm week ahead before the September kicks in, maybe range for this week, but ultimately lower USD, a chance for EMs.
Market talk What we have witnessed since the beginning of May has its roots in a fundamental improvement of the US economy, but has created a larger mess in financial markets than anyone would have guessed… USD strategy If we …
USD may attempt to recover vs majors after last week's sell-off, but only temporarily. Asian and Chinese data is still a worry for Emerging Markets/commodity FX, even with central bank support now...
The Emerging Market and commodity currencies (“carry” currencies) have depreciated against USD and EUR in May, in particular AUD and ZAR have been hit. We expect stabilisation in China’s data soon, and the Fed is not to end QE in …
Here are the usual financial forecast slides with our new financial forecasts published this this morning in Economic Outlook. We have changed our forecast for the Fed, the BoE, the SNB, Riksbanken, Euro rates, USD rates, EUR/USD, JPY, GBP, SEK, NOK, oil and the base metals.
I put the odds of the full sequester spending cuts going through on 1 March at more than 50%. Moreover, I expect most of the cuts to be sticking. I expect such an outcome to be slightly negative for risky assets and slightly positive for US Treasuries and the USD.
Yesterday’s Fed minutes showed a central bank increasingly divided about the future of asset purchases, even though most participants found the purchases effective in easing financial conditions and helping stimulate economic activity. Still, the Fed clearly wants to be careful not to start removing accommodation too soon or too fast.
Risk-on is likely to dominate in the very near-term but given the lack of fundamental improvements we expect to see a correction sometime during the spring.
Will Fed fire more guns - against the USD?...
Not much resolute action on the global Markets last week, neither much consistency. But lots of events/data this week to get some action on...
I remain long-term bullish on the USD. Any near-term headwind to the USD due to improved risk sentiment when the risk related to Greece and Spain is removed should be seen as a USD buying opportunity.
Paradox of risk: it is highest exactly when it seems it is lowest. FX markets are to catch the cold soon...
"Risk off" signs emerged, but contained so far...this week may be decisive
The US data was not as bad as feared, but not good enough to take Fed off QE#. This week - lots of talk and the quarterly earnings kick off to stir the risk sentiment...
The non-farm jobs report came good on the headline, with the public sector scaling the hiring up...
Don't be fooled by some positive US macro headlines over the past week - payrolls may come weaker than expected...
Moral hazard may be one reason to the declining uncertainty in the Markets which is to EUR support...
Nordea Economic and Market Outlook: Our latest take on Nordic and Global financial markets and economies.
We and the markets have been surprised by the positive US ISM reading today, as the most important new orders sub-index led the gains...
In this issue we take a stance on QE, which we think will end up being futile.
4-years into Lehman default (happy anniversary!), and the September so far has been positive for the risk sentiment. The currency debasement path has been chosen, and so far it has been successful in reflating the risky assets...
Last week’s surprisingly weak employment report probably tipped the scales in favour of a third round of large-scale asset purchases (QE3) when policy makers meet later this week.
Will Fed confirm the USD crush?
QE1 + QE2 = 2 million new jobs. Easy.
In his speech at Jackson Hole, Bernanke provided no new information of the form or timing of any additonal easing.
Three US fiscal issues pose a threat to the US economic outlook. In this research note, I have tried to list a few scenarios of how the looming and potentially damaging US fiscal drama could play out.
It has been a rather positive summer, with the risky assets and the cyclical currencies performing. But in the previous week we saw some key levels challenged across the assets.
We are lifting our short-term interest rate forecasts but keeping the 2013 forecasts. We’re in the midst of updating our macro forecasts and will introduce 2014 financial forecasts in a fortnight.
US Congressional leaders have reached a short-term budget deal that avoids a government shutdown, extinguishing one of Washington’s numerous potential fiscal fights ahead of the November election. The fiscal cliff, however, is still looming at the end of the year.
It seems the Fed needs more weak data, before it will provide additional stimulus. Our baseline scenario sees US economic data picking up later this year, in which case the Fed could stick with Operation Twist. Still, in the short run, weak data may continue, supporting further easing.
Recent data implies that growth in US consumer spending has weakened, whereas underlying retail sales grew by close to 6%. In light of the weak data, dovish comments will likely be heard from Bernanke tomorrow.
2012 is likely to resemble the past two years: US economic data will start to generally surprise on the positive side in the autumn.
June’s US ISM manufacturing survey is clearly a negative for investor confidence, although expectations of more easing from the Fed (QE3) are likely to increase.
The rally after the Greek elections and the Spanish bailout lasted just a few hours. But the third attempt didn't lie - after the surprise outcome of EU Summit on the night to Friday got the markets insanely happy for the rest of the day. Poor are those who took on additional EUR short and USD long positions earlier in the week!
I believe there are good reasons to expect a rebound in US activity in late summer or early autumn. If this prediction proves right, we should see an improvement of risk appetite in financial markets before long.
We have made minor adjustments to our financial forecasts. The storyline is more or less unchanged.
Yet another EU summit this week will not change trends. Moderate optimism on FX front - EM and commodity currencies to recover in the coming weeks.
The Fed gave a nod to the slowing US economy today, extending its Operation Twist through the end of 2012. However, the extension is likely to have very little impact on the wider economy and overall risk sentiment in financial markets.
The world is still here today! The currency markets reacted positively to the outcome of Greek elections. The 17th of June was "make it or break it" for EUR in many eyes and hence no surprise the EURUSD jumped to 1.2748 on the news.
The Fed is likely to provide more monetary easing at the upcoming FOMC meeting with a short extension of its Operation Twist. The outcome of the pivotal Greek election on Sunday could also have a further effect.
Apart from the continued talks around when Spain will make the official request for aid to its banks, the Greek elections are definitely the main thing to follow.
While Fed chairman Bernanke offered few hints that further monetary stimulus is imminent, the Fed seems to be leaning more towards an extension of Operation Twist rather than pure QE at the 19-20 June FOMC meeting.
Soon after the dismal Friday's US non-farm payrolls report the EURUSD was taken more than 100pips higher. The obvious reason for that is that of expectation for QE3 from Fed coming, which we had warned about multiple times...
Today’s weak US employment report solidifies at least one of the pre-conditions for more monetary policy easing from the Fed.
After this week’s heavyweight US economic data, the spotlight is even stronger in the Euro zone again next week.
We expect US economic data to continue to come in on the weak side, putting renewed pressure on risk appetitive and continuing to support the safest assets.
Fed chairman Bernanke may effectively already be a lame duck as he is likely to step down in early 2014 and his dovish views appear to be increasingly isolated within the organisation. This could be a huge issue going forward.
Probably the most important debate on US monetary policy is whether there really is an aggregate demand shortfall, and as a result, a negative output gap. If the answer is yes, then the Fed should continue supporting the economy. If the answer is no, monetary policy should soon be tightened.
While the soft April employment numbers leave the door open for further monetary easing, the report isn’t bad enough to force the Fed to announce QE3 at the 19-20 June FOMC meeting.
Our latest take on Nordic and Global financial markets and economies.
Outlook for next week's key figures and events in the US, the euro area, China, Japan, UK, Canada, Switzerland, Australia and New Zealand.
While QE3 is still expected to be announced in June, too little Fed tightening is priced in longer out.
At 2.2% US GDP growth was probably only slightly weaker than the Fed’s expectations for Q1. However, I believe the Fed’s growth forecast will be challenged more in Q2.
We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.
We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.
Notable flight-to-safety demand has taken place today ahead of the Easter holidays. Even though the drivers are real, one should not over interpret the moves seen on thin markets ahead of a long weekend, with also tomorrow's US employment report creating uncertainty.
Yesterday's Fed minutes sent a signal that the central bank is not tilted towards more quantitative easing any more. Such a message opens more room for espcially longer US Treasury yields to rise from current levels.
The batch of good economic news seems to have run its course, suggesting financial markets might be at a new turning point.
Considering the macro risks hanging over the global economy, we argue that markets may be too complacent. We see four downside risks that could materialise this year, undermining global growth and eventually negatively affecting investor confidence and market valuations of risky assets.
Today's fresh data from the US labour market in December certainly shows an economy that has picked up steam in the second half of 2011.
A US payroll tax hike is looming but the markets seem to be ignoring this major risk of recession.
Taking the temperature of the cross currency basis swap market following the coordinated central bank actions to ease money market tensions.
Nordea forventer en meget kraftig stigning i dollaren de kommende 12 måneder – USD/DKK-kursen ventes at stige til 7,45.
In the late European session on Friday, the Spiegel story that Greece was considering leaving the Euro sent jitters through financial markets.
It feels increasingly like "Lehman" when watching financial markets these days. But, contrary to 2008, the level of stress varies significantly from asset class to asset class. If the risk of a global recession escalates the level of stress will intensify further leading to risk off.
Central bank rescue to help only gradually. The past couple of months have clearly brought a turn for the worse in two respects.
In this video presentation, Nordea's Chief Analyst for the US, Johnny Bo Jakobsen, and Chief Analyst for the Euro zone, Anders Matzen, discuss the new US debt deal and the consequences of a downgrade of US government debt.