| Daily Forex Fundamentals | Written by Saxo Bank | Aug 04 08 06:28 GMT | | |
Forex Market Update: Mixed US employment Report Does Little For The USD. This Week Is Central Bank Week As Market Looks For Guidance From The Fed, RBA, ECB And BOERBA set to prepare the market for rate cuts ahead at tonight's cash target announcement? MAJOR HEADLINES - PREVIOUS SESSION
THEMES TO WATCH - UPCOMING SESSIONKey event risks today (all times GMT):
Market Comments The US employment report was a mixed on Friday, with the nonfarm payrolls number a bit less bad than expected (slightly surprising considering the dire weekly initial jobless claims numbers that have been rolling in lately), but still negative and an unemployment rate that continues to grow. Judging from past employment cycles, we would expect the unemployment rate to peak well above 7.00% some time in late 2009. With the employment picture looking this grim and oil prices having eased so heavily in recent weeks, we have a tough time seeing the Fed coming out with its inflation fighting guns a blazing at tomorrow evening's rate announcement and monetary policy statement and would expect another wishy washy statement that tries to sound like the Fed is still serious about an inflation fighting mandate while obviously hoping that it can continue to keep rates unchanged. Looking at the technical side of things, EURUSD needs to break 1.5500 to keep the bearish momentum alive this week, with 1.5285 the next major obstacle to the downside. To the upside, a rise above 1.5700/1.5800 zone would set the USD rally on end for now. Besides the Fed this week, we will also have the RBA tonight (more on that one below) and the ECB and BOE out this week. None of the four is likely to move on interest rates, as the USD is too weak and inflation too high and the growth data for the latest quarter too resilient (but weakness still too evident on the flipside..) for the Fed to budge for now. The ECB will not move interest rates either as it will need to see more data and an even bigger drop in commodity prices before it begins to feel comfortable with relaxing its vigilance. The data is starting to look scary for the EuroZone, however, and it will be very interesting to see how the ECB discusses prospects for the economy this Thursday. The BoE almost never releases a statement and showed a split personality the last time around with a 3-way vote last time around (7 for unchanged, 1 for a HIKE (oh dear!) and 1 for a cut. It seems clear that the UK landing is already unfolding and feels very hard indeed as the BoE stands on the sidelines. As a reminder of how early we are in the ball game for the coming economic downturn in Australia, we note that the House Price Index only fell slightly for Q2 (this was the first drop since 2005) and that the year-on-year comparisons still show healthy growth in prices of around 8%. But if we look elsewhere at housing-related numbers in Australia, we see other signs of a slowdown in the pipeline, including a -8% drop in Building Approvals from last year, a construction industry survey that has fallen off a cliff in recent months. At least one article also reported that Australian private sector debt shows that consumers down under are nearly as overstretched as their UK counterparts, and more so than US consumers. Let's see what the RBA's read on the situation is at this evening's Cash Target announcement. The RBA is widely expected to leave rates unchanged, but Governor Stevens may take the opportunity to begin to prepare the market for interest rate cuts ahead. Our default view is that the great AUD bull market may largely be over with, especially if the commodity price rally continues its steep unwind in the months ahead. As all the major central banks move to a rate-cutting path, the trajectory of interest rate differentials will favor the low yielders over the high yielders. Our biggest question as we enter this week is what on earth is EURCHF doing up here? We feel that the risks to the global economy seem to be mounting every day, and that EURCHF - the classic risk barometer - seems to be have completely lost the plot. A significant fall may be in store soon for this pair if it ever decides to play catchup with reality...
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. | |
Monday, August 4, 2008
Sponsor Forex Brokers Mixed US employment Report Does Little For The USD
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