FX Weekly Market Letter

Transcription

1 FX Weekly Market Letter FI/FX Research - Tuesday, August 21, 2012 s Last 1 mth 3 mths 6 mths 12 m ths Currencies EUR/USD 1,2412 1,25 1,20 1,15 1,20 EUR/GBP 0,7871 0,80 0,79 0,77 0,76 EUR/CHF 1,2010 1,20 1,20 1,20 1,30 EUR/NOK 7,3248 7,30 7,30 7,20 7,40 EUR/PLN 4,0668 4,10 4,20 4,35 4,25 EUR/RUB 39, ,81 39,00 38,01 38,28 EUR/SEK 8,2521 8,20 8,30 8,40 8,50 USD/RUB 31, ,65 32,50 33,05 31,90 USD/JPY 79, ,50 81,00 82,00 90,00 GBP/USD 1,5770 1,56 1,52 1,49 1,58 Historical Performance Source: Swedbank CHANGES (%) Last 1 week 3 mths YTD Currencies EUR/USD 1,2412 0,73-3,17-4,24 EUR/GBP 0,7871 0,14-2,76-5,56 EUR/CHF 1,2010-0,01-0,02-1,30 EUR/NOK 7,3248 0,10-3,81-5,39 EUR/SEK 8,2521-0,04-9,47-7,47 EUR/PLN 4,0668-0,47-5,75-8,94 EUR/RUB 39,5333 0,65-0,72-5,25 USD/RUB 31,8517-0,01 2,33-0,89 USD/JPY 79,4100 0,85 0,13 3,25 GBP/USD 1,5770 0,59-0,41 1,46 RUBBASK 35,3109 0,37 0,77-3,15 Commodities (USD) CRB Commodity Index 304,76 1,48 5,16-0,18 WTI Crude 96,74 3,54 4,50-2,11 Brent Crude 114,54 2,13 7,14 9,53 Gasoil 983,25 2,66 8,29 9,49 Natural Gas 2,788-1,62 0,80-15,08 Gold 1625,05 1,63 2,01 3,92 Silver 28,91 3,90 1,54 3,81 Nickel ,51-9,85-17,29 Tin ,30-3,89-3,68 Copper 7455,5 0,57-3,53-2,15 Milling Wheat (EUR) 263 3,14 21,48 37,52 Equity Indices S&P 500 (USD) 1418,1 1,01 7,76 12,76 STOXX Europe 600 (EUR) 273,0 0,91 13,67 11,63 MICEX Index (RUB) 1454,9-0,52 12,05 3,76 OMX Baltic Benchm. GI (EUR) 523,4 1,72 6,94 21,17 NOMINAL VALUES Last 3m ago 12m ago EUR Interest Rates 10-year Interest Rate Sw ap 1,872 1,967 2,753 5-year Interest Rate Sw ap 1,065 1,376 2,066 6-month Euribor 0,600 0,969 1,734 Source: Bloomberg The US economic indicators showed modest improvement. The Euro-zone second quarter GDP in line with market expectation. No major news expected from the FOMC Minutes on Wednesday. European leaders meet to discuss Greece s fiscal adjustment program. Flash PMI numbers published by China and the Euro-zone. Last Week Equities advanced again last week, despite a light calendar of data releases and an absence of political progress in Europe. EUR performed strongly and the upward momentum in crude oil maintained its pace, as Brent Crude Oil crossed the USD 115/bbl mark. The US economic indicators showed modest improvement. The retail sales for July came in above expectations, rising 0.8% mom vs. expectation of 0.3% mom, and manufacturing output experienced expansion. Furthermore, inflation came in lower than expected, arriving at 1.4% yoy in July (1.6% yoy expected). Industrial production increased 0.6% mom in July, indicating higher rate than the expected 0.5% mom. The Empire State manufacturing index and housing starts, on the other hand, fell short of expectations. In Europe, the Euro-zone s second quarter GDP (s.a.) contracted by a -0.4% yoy and industrial production by a -2.1% yoy in June. The Consumer Price Index (CPI) in the Euro-zone showed a rise of 2.4% yoy in July. German preliminary Q2 GDP (nsa) expanded 0.5% yoy vs. expectation of 0.9% yoy and 1.7% yoy growth seen in Q1. In the UK, it was revealed that the Bank of England unanimously left its benchmark interest rate unchanged at 0.50%. The inflation rate arrived at 2.6% yoy in July, higher than the market expectation of 2.3% yoy. What s Next The current week was kicked off in a quiet mood and the market digested heavy weekend news flow smoothly. This week, market-moving events will include FOMC Minutes on Wednesday, Flash PMI of China and the Eurozone published on Wednesday and Thursday respectively, EU Consumer Confidence number on Thursday and US Durable Goods on released on Friday. Europe is returning from their summer holidays, which should pick up market activity. Also, headlines from Greece and Spain will likely continue to form market sentiment. Overall, investors are awaiting more information on when or whether Spain will request assistance from the European Financial Stability Facility (EFSF) and details on how the European Central Bank (ECB) could intervene. Swedbank has revised its global GDP growth downward to 3% in 2012 and 3.1% in 2013, from 3.1% and 3.4% from April s forecast (see table on page 4). The main negative forecast risk is a worsening of the crisis in the Euro area, but the US s falling off the fiscal cliff, a hard landing in China, and higher commodity prices could also generate a weaker outcome. On the contrary, faster crisis resolution could lead to higher growth. Swedbank has assigned a probability of 60% to the Euro-zone s muddling-through scenario. On the economic data front, Euro-zone is publishing its PMI manufacturing for August on Thursday with the expectation that the Euro-zone remains in recession and the economy is stagnant. The index is seen to improve modestly from 44.0 in July to 44.2 in August by the consensus. The FX Weekly Market Letter 21.Aug.2012 page 1/6

2 Government Bond Yields 8,0% 7,5% 7,0% 6,5% 6,0% 5,5% 5,0% 4,5% 4,0% 3,5% 3,0% 2,5% 2,0% 1,5% 1,0% Brent Crude Oil Oil vs. Ruble Basket* Chart 3 France 10Y Germany 10Y Italy 10Y Spain 10Y WTI Crude Oil, USD (lhs) Brent Crude Oil, USD/bbl Ruble Basket, RUB (rhs) Consumer Confidence Indicator, also published on Thursday, is seen to worsen to in August from 21.5 in July. Germany is publishing its final Q2 GDP figure on Thursday, which is expected to expand by 0.5% yoy (nsa) / 1.0% yoy (wda). Additionally, leaders are meeting this week to discuss Greece s fiscal adjustment program. The head of Euro-zone s finance ministers group, Jean Claude Juncker, visits Athens on Wednesday and German Chancellor Merkel and Greek Prime Minister A. Samaras are meeting on Friday. Both of these meeting are likely to form the market mood over the week. In the US, existing home sales figures are published on Wednesday, new home sales on Thursday and durable goods orders on Friday. The former is expected to rise 3.2% mom in July from -5.4% decline in June. New home sales are also expected to expand by 0.6% mom in June, but at lower growth rate compared to 0.8% mom seen in May. Durable goods orders are expected to experience a modest bounceback of 2.5% mom in July. Additionally, the Markit Preliminary Manufacturing PMI figure, published on Thursday, is seen to arrive at 51.4 in August. Overall, compared to July, the US economy is looking slightly healthier, although one month does not make a trend. Still, at least for now it makes the third round of quantitative easing (QE3) from the Fed less likely in the eyes of investors and has so far supported USD. Therefore, no major news are expected from the FOMC minutes on Wednesday. Uncertainty remains the main driver that keeps EUR under pressure. one-month EUR/USD target has been raised to , but three-month target kept at The second estimate of the UK s Q2 GDP is going to be the highlight of the economic releases this week, as the market sees the growth rate to be revised up to -0.6% yoy from -0.7% yoy, following stronger industrial production and construction output data for June. Additionally, preliminary second quarter growth rates in private consumption, goverment spending, exports, imports and total business investment are released on Friday and expected to arrive at -0.2% qoq, 0.3% qoq, -0.9% qoq, 0.4% qoq and 3.6% yoy respectively. China s HSBC Flash Manufacturing PMI for August, released on Wednesday, will be followed closely by the market to see how the situation has changed from July s value of Russian industrial production expanded by 3.4% yoy in July, beating market expectation of 2.5% yoy. Producer prices, real wages and retail sales, on the other hand, fell short of expectation, expanding by 4.1% yoy (6.4% expected), by 10.2% yoy (11.2% expected) and by 5.1% yoy (6.2% expected) respectively in July. Nevertheless, unemployment rate remained at a record low of 5.4% in July. When we look at Ruble Basket, we could see that the recent rise in the oil price has not been accompanied by a strengthening Ruble (see picture). Historically the correlation between the Ruble and the oil price has been strong, but now the correlation has weakened. This effect with Brent Crude Oil is even more evident, but the latter has rallied too rapidly on supply concerns. In short, it is very likely that the correlation will strengthen again and this should mean that the Ruble Basket* will strengthen from current levels. Overall, we expect Ruble Basket to trade in a range of and Polish Consumer Price Index (CPI) dropped lower than expected, from 4.3% in June to 4.0% in July (4.1% expected). Sold industrial output managed to beat the market by increasing 5.2%yoy in July (4.0% expected). The employment expectedly stood still in July, but the average gross wages expanded 2.4% yoy in July, less that the expected growth rate of 4.0% yoy. Today, Poland is publishing its core inflation number, which is expected to remain at 2.3% in July. On Friday, the retail sales growth rate and unemployment rate will be released. The former is seen to come in at 7.0% yoy and the latter at 12.3% in July. Overall, the inflation rate is still too high, which leaves the Central Bank hawkish**. On the other hand, economic momentum is weak and will be hampered by fiscal austerity and lower exports. Additionally, the county s external account is in deficit. In short, zloty has appreciated too much and does not reflect negative fundamentals. * The Ruble Basket consists of 45% EUR and 55% USD and is a measure that the Russian Central Bank uses to track the ruble s performance against the two major currencies. ** Hawkish favouring an increase in interest rates. FX Weekly Market Letter 21.Aug.2012 page 2/6

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4 Key Events Ahead Monday August 20, 2012 JPN AUG Nationwide Dept. Sales (YoY) JUL -1.2% JPN AUG Tokyo Dept. Store Sales (YoY) JUL 0.1% RUS AUG Retail Sales (Real) (YoY) JUL 6.20% 6.9% RUS AUG Unemployment Rate (%) JUL 5.50% 5.40% CHI 18 AUG July Property Prices SWE Deputy Governor Per Jansson participates in a panel discussion at the Australian central bank's conference on "Property markets and financial stability". JPN 0700 Leading Index CI JUN F 92.6 EMU 1100 Construction Output SA(MoM)/ WDA(YoY) JUN 0.1%/-8.4% US 1430 Chicago Fed Nat Activity Index JUL Tuesday August 21, 2012 NO AUG Unemployment rate(aku) JUN 0.3% JPN 0630 All Industry Activity Index (MoM) JUN 0.2% -0.3% UK 1030 Public Finances (PSNCR) JUL 3.0B SWE 1200 First Deputy Governor Kerstin af Jochnick holds the speech "Kick-off for the monetary policy meeting in September". PD 1400 Core Inflation (YoY) JUL 2.30% 2.30% Wednesday August 22, 2012 JPN 0150 Merchnds Trade Balance Total JUL - 270B 61.7B JPN 0150 Adjusted Merchnds Trade Bal. JUL - 460B B JPN 0150 Merchnds Trade Exports (YoY)/Imports (YoY) JUL -2.7/ /-2.2 US 1300 MBA Mortgage Applications w/e -4.5% US 1600 Existing Home Sales / Existing Home Sales (MoM) JUL 4.50M/3.0% 4.37M/-5.4% US 2000 Minutes of FOMC Meeting Thursday August 23, 2012 CHI 0400 Conference Board China July Leading Economic Index CHI 0430 HSBC Flash Manufacturing PMI AUG 49.3 GER 0800 GDP nsa (YoY)/wda (YoY) 2Q F 0.5%/1.0% 0.5%/1.0% GER 0800 GDP s.a. (QoQ) 2Q F 0.3% 0.3% FRA 0900 PMI Manufacturing AUG P FRA 0900 PMI Services AUG P GER 0930 PMI Manufacturing AUG A GER 0930 PMI Services AUG A SWE 0930 Unemployment Rate JUL 7.10% 8.8% 7.2% EMU 1000 PMI Composite AUG A NO 1000 GDP s.a. (QoQ) 2Q 1.3% 1.4% NO 1000 GDP Mainland Norway s.a (QoQ) 2Q 1.0% 1.1% EMU 1000 PMI Manufacturing AUG A EMU 1000 PMI Services AUG A US 1430 Initial Jobless Claims w/e 365K 366K US 1430 Continuing Claims w/e 3305K FX Weekly Market Letter 21.Aug.2012 page 4/6

5 US 1458 Markit US PMI Preliminary AUG US 1545 Bloomberg Consumer Comfort w/e EMU 1600 Consumer Confidence AUG A US 1600 New Home Sales / New Home Sales (MoM) JUL 362K/3.4% 350K/-8.4% US 1600 House Price Index MoM JUN 0.5% 0.8% SWE 1700 First Deputy Governor Kerstin af Jochnick holds the presentation "Financial market challenges" at the OMEO seminar on regulation of the financial sector Friday August 24, 2012 GER AUG Import Price Index (MoM)/(YoY) JUL 0.9%/1.4% -1.5%/1.3% SPA 0900 Producer Prices (MoM)/(YoY) JUL -0.5%/2.5% UK 1030 GDP (QoQ)/(YoY) 2Q P -0.5%/-0.6% -0.7%/-0.8% US 1430 Durable Goods Orders JUL 2.0% 1.6% US 1430 Durables Ex Transportation JUL 0.5% -1.1% US 1430 Cap Goods Orders Nondef Ex Air JUL -1.4% US 1430 Cap Goods Ship Nondef Ex Air JUL 1.2% FX Weekly Market Letter 21.Aug.2012 page 5/6

6 Contacts FX/FI Sales Estonia FX/FI Sales Latvia FX/FI Sales Lithuania Märt Kroodo Analyst Information to the customer This research report has been compiled by Swedbank Large Corporates & Institutions business area within Swedbank AB (publ) (Swedbank), registered address Stockholm, regulated by Swedish Financial Supervisory Authority (Finansinspektionen). This research report is not and should not be construed as an investment advice or investment recommendation. It is not an offer or a solicitation of an offer to buy or sell any currencies or financial instruments and shall not be construed as an investment, tax, financial or legal advice. The information in this document has been compiled in good faith from sources believed to be reliable, but for the correctness or completeness of which we assume no liability. It is recommended that recipients of this document supplement the basis for their decision-making with any material that might be considered necessary. Views expressed in this document represent our present opinions but may change. We reserve the right to modify the views expressed herein at any time without notice, as well as the right not to update this information or discontinue it s publication without notice. Swedbank accepts no liability whatsoever for any direct or consequential loss or damages of any kind arising from the use of this document. Investments in financial products are subject to market risk. Changes in rates of exchange, interest rates and market prices may have adverse effect on the value of the investments There is a risk that there will be a loss on the investment. Prices rise and fall and past performance is no assurance of future performance. Analysis and presentations in this research report are based on standard valuation methodology as well as publicly available information. Recipients should be aware that Swedbank, its subsidiaries and/or employees from time to time may have positions or holdings or otherwise have financial interests in the investments directly or indirectly referred to herein. Swedbank have implemented internal instructions and measures mainly by keeping departments and units with conflicting interests separated - in order to prevent conflicts of interest to damage the interests of Swedbank s clients. This document must not be published or distributed in the United States or to other countries or persons to which publication or distribution is prohibited. The material may not be reproduced without the consent of Swedbank. In Latvia this research report is disseminated by Swedbank AS, registered address Balasta dambis 1a, Riga, LV-1048, regulated by the Financial and Capital Markets Commission of the Republic of Latvia. In Estonia this research report is disseminated by Swedbank AS, Liivalaia 8, Tallinn, Estonia, regulated by the Financial Supervision Authority of Estonia. In Lithuania this research report is disseminated by Swedbank AB, Konstitucijos av. 20A, LT Vilnius, Lithuania, regulated by the Bank of Lithuania. FX Weekly Market Letter 21.Aug.2012 page 6/6