Forex - Good morning Emerging Europe/Africa

 05:18 (GMT) 21 Nov

  [Forex Highlights]

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Good morning Emerging Europe/Africa (YJSC4003)


Good morning Emerging Europe/Africa - 21 Nov


USD/Majors: Many traders were pointing to new PM Mariano Rajoy election win over the weekend as the reason for the strong trading in EUR seen after the open. However, continued repatriation flows into Europe were the likelier reason, with prices trading firmly above 1.3500. Even bearish comments from Chinese Premier failed to put a dampener on its strength. AUD did not escape a fall though, as the commodity currency is still heavily linked to China's fortunes. AUD broke the third option level of 0.9950 as prices made a run to 0.9943, with EURAUD going to near 1.3600 levels. Although CAD fell as well, the fall was capped by option interest at 1.0300 in USDCAD again.

JPY Crosses: The European debt contagion continued to spread as Spain became the next economy under scrutiny. Just as Asian bourses sank across the board, JPY crosses also encountered slippages. USD/JPY and EUR/JPY lost around 10pips each to levels around 76.80 and 103.80 respectively. AUD/JPY slid to lows around 76.40 before comments by RBA Debelle pulled the cross back to76.60-ish levels. GBP/JPY was last seen under the 121-figure, having lost 60-odd pips. Nikkei was near flat after lunch at -0.2%.

Good morning Emerging Europe/Africa (YJSC4001)


- China: Vice Premier Wang Qishan warned that the global economy is heading for a long-term recession and China will need to deepen its financial reforms to cope with the fallout

- US: Congress's special deficit-reduction committee teetered on the brink of collapse Sunday, nearing the end of an effort to break the back of the nation's burgeoning deficit before the 2012 election campaign kicks into high gear. - WSJ

- EU: The commission discussion paper suggests three options for issuing euro bonds. It concludes that they could be issued carrying limited guarantees from governments without changes to the European Union treaty that would require ratification from all 27 EU states. - WSJ

- EU: Deutsche Bank CEO Josef Ackermann said Europe needs a firewall to prevent its debt crisis from spreading and should increase the size of its rescue fund, from the current 1 trillion to 2 trillion euros. - BBG

- EU: Leader of France's far-right National Front Marine Le Pen, has made abandoning the euro one of the pillars of her Presidential election campaign - FT

- EU: Spain's new leader vowed to battle "against the crisis" but warned there "would be no miracles" as his conservative party swept to victory in Sunday's general election. - Telegraph

- World: China's Vice Premier Wang, in talks with US, said global economic situation remains grim. US and China should work together to achieve balanced economic growth. Ensuring economic recovery is overriding priority.

- Japan: Japan October exports -3.7%y/y, imports +17.9%y/y, posting a trade deficit for October -273.8bln vs expectation of surplus of 39.9bln.

- Japan: BoJ Minutes for Oct 31: few board members said buying JGBs 1-2 years to maturity were effective in ensuring FX stability. Member Ryuzo Miyao said increasing risks to economy warranted Y10trillion increase in asset buying.


USD/Asians: Onshore markets in India were the last to open and already, the morning has witnessed considerable depreciation in the rupee. INR led the rest in losses, registering -0.8% vs the dollar, followed by IDR at -0.4% and MYR at -0.3%. The rest of regional currencies were relatively unchanged by noon. For the bourses, HSI, Taiex and JKSE were the largest laggard with >1% of losses by mid-day. The rest waffled in moderate red. Data-wise, Taiwan export orders for October will be released later today while Philippines' budget and Thailand's custom trade figures for October are due anytime within 21-25 of November.

Good morning Emerging Europe/Africa (YJSC4002)


* In the US: The shortened week will start on a relatively slow note as only Oct existing home sales data will be due on Monday. We see existing home sales continuing a descent with a 2.2% decline to 4.80mn as the downside reflects the fragile state of housing demand. Fed's Lockhart will speak on the economy at 19:30 GMT.

Tuesday will bring the more interesting revisions to Q3 GDP and we expect Q3 growth to be revised higher to 2.8% from 2.5%. Positive trade revisions will contribute to the pickup, though the underlying trajectory of the US economy appears to be only moderately positive. FOMC minutes from the Nov 1-2 meeting will also be released and will be closely scrutinized for any discussions of further Fed action after the meeting yielded no policy action. The minutes will likely reinforce the fact that the Fed is standing by with additional accommodation if necessary. Fed's Kocherlakota is scheduled to make remarks at 18:00 GMT.

The real data-heavy day will come on Wednesday as Oct durable goods orders prove the headline release. We expect durables to remain weak with a 1.5% decline, though the underlying bias in the series should be moderately positive as transportation accounts for the majority of the decline. Ex-transport durables should see a mild 0.1% rise. Oct personal income and spending should see income rise 0.2% as spending increases 0.4%, suggesting better but unsustainable consumer support of the economy. The savings rate is likely to decline to 3.4% - the lowest level since Dec 2007. Weekly initial claims are likely to remain at their somewhat lower levels, edging lower to 389k as continuing claims rebound to 3.66mn. Final Nov Michigan sentiment should be revised up to 64.3 from 64.2, though there is a risk that positive economic data may be offset by unsettling financial market news. 5-year inflation expectations may be revised up to 2.7% as 1-year expectations remain unchanged at 3.2%.

There will be no data due on Thursday due to the Thanksgiving Day holiday. Friday will also see no data released as an early close is scheduled for both the equity and bond markets.

* In Europe: It's a busy survey week in Europe. Flash November Eurozone consumer sentiment is expected to slip to -21 from -19.9 in October on Tuesday, with flash November Eurozone PMIs following on Wednesday. These are unlikely to be pretty, though with manufacturing and services (and thus the composite too) all expected at 46.0 the good news will bet that the fall is slowing.

Further business surveys include the November Ifo (4CAST survey 105.5 from 106.4) and BNB Belgian business sentiment (4CAST -11.0 from -10.4), both due on Thursday. France's INSEE business sentiment rounds things off on Friday (4CAST 94 from 97). On the consumer confidence side Italy's is on Thursday (4CAST 93 from 92.9), France on Friday (79 from 82). On the activity side Eurozone September industrial orders are estimated to have fallen by 2.5%m/m to more than reverse the 1.9% August rise. Thursday's final estimate of Q3 German GDP will be confirmed at 0.5% q/q, 2.6% y/y.

* In Japan: On Monday, Sep's All industry index is seen to come in at -0.5% m/m. Sep's Tertiary index arrived at -0.7% m/m while industrial production was also much softer for the month at -4.0% m/m. No important data on Tuesday, and Japan will be off on Wednesday for Autumnal Equinox Day.

Thursday will see another empty data calendar, leading to Friday where CPI data is due. Nov's Tokyo core CPI (ex fresh food) is seen to arrive little changed from Oct's reading at -0.4% y/y. Oct's Nationwide CPI (ex fresh food) will trip back into negative territory seen at -0.1% y/y. Oct Corporate service price index will be released where we anticipate a 0.3% m/m fall in prices

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