Wakeup Call: GBP Collapsing On Mervyn King Comments

Daily Forex Fundamentals | Written by Saxo Bank | Oct 22 08 07:04 GMT |

Stocks continue to edge lower. Precious metals and commodities also under pressure. Calendar Economic Data Releases Country Name Time (GMT) Expectation Prior Comment UK Bank of England Minutes 08:30 EC E-Z Budget deficit/GDP Ratio (DEC) 09:00 -0.6% -0.6% US DOE U.S. Crude Oil Inventories (OCT) 14:35 2650K 5611K Earnings Releases Country Name Time (GMT) Expectation Prior Comment UK GlaxoSmithKline 12:00 0,238 US AT&T 12:00 0,71 US Amazon.com Aft-Mkt 0,327 What's going on? Sarkozy in a dirigist frenzy talked about setting up Sovereign Wealth Funds to buy big companies of national importance. His talk about a return to 'financial disciplin' - meaning a Bretton Woods like set-up - is also extremely discomforting. The Fed is stating that it wants to lend $540B to money-market funds troubled by investor withdrawals. BoE's Mervyn King was extremely bearish yesterday, sees risk of sharp and prolonged demand slowdown. Hedge Funds have posted record losses in September and they are also under intense pressure from redemptions. Assets closely related to hedgefund performance will be under continued pressure. Our estimates show that this is the case for EURUSD, Stocks (MSCI/S&P500), Gold, Crude Oil and to a certain extent Treasuries. They should all be edging lower towards year-end. FX FX Daily stance Comment EURUSD - Bearish tone confirmed with move through 1.3000 (now resistance). Target still 1.26-1.27 window EURJPY - More downside until we reach 125.85 2003 low USDJPY - Nothing good coming out of UK. Sell into rallies, res now 1.6500 GBPUSD 0 Heavy EURJPY selling keeping USDJPY pinned down. Ranging 99.50-100.50 USDCHF + The broader bullish USD keeps 1.1900 target on cue. 1.1500 now supports Equities Equities Daily stance Comment DAX - Buy on rally at 4640, target 4700. S/L: 4618. FTSE100 - Buy at 4115, target 4205. S/L: 4056. S&P500 - Buy at 924, target 966. S/L: 912. NASDAQ - NIKKEI225 - Futures Commodities Daily Stance Comment Gold (XAUUSD) - Prefer the downside. Target 737 with stop above 773. Silver (XAGUSD) - Sell rallies with stops above 10.27. USD strength still the theme. Oil (WBSX8) - Sell the break of 68.92 with stops above 72. General unwinding still hurting energy. Analysis Disclosure & Disclaimer Saxo Bank 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 Saxo Bank 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 do not occur as anticipated. Saxo Bank utilizes financial information providers and information from such providers may form the basis for an analysis. Saxo Bank accepts no responsibility for the accuracy or completeness of any information herein contained. Any recommendations and other comments in Saxo Bank's analysis derive from objective fundamental macro economical and company specific calculations, statistical and technical analysis, and subjective general market assessment. If an analysis contains recommendations to buy or sell a specific financial instrument, such recommendation should be seen as Saxo Bank's opinion that the specific instrument will respectively outperform the relevant market or underperform compared to the market. Saxo Bank's recommendations should statistically correspond to an even distribution between buy and sell recommendations. The recommendations may expire promptly due to market volatility and in general, Saxo Bank does not anticipate its recommendations to be valid more than one month. An analysis will be updated if and only if a market development or other issues relevant to the analysis render a new analysis on the same topic relevant. Saxo Bank's analysis does not cover any specific financial product over time but only products which Saxo Bank's strategy team finds it important to cover at any given point in time. In order to prevent conflicts of interest, Saxo Bank has established appropriate business procedures, incl. procedures applicable to research and analysis to ensure objective research reports. Saxo Bank's research reports have not been discussed with the parties, e.g. issuers of securities, mentioned in the analysis. Saxo Bank is under supervision by the Danish Financial Supervisory Authority. Saxo Bank does not engage in corporate finance activities and accordingly, Saxo Bank's employees, incl. the persons responsible for an analysis, do not receive remuneration associated with investment banking transactions.