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October/06/2011- Comments and forex-analytics from FBS

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October/06/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Oct 06, 2011 12:14 pm

BMO: recommendations ahead of BoE and ECB meeting

There are 2 important central bank meetings on Thursday: the one of the Bank of England (with the rate and the amount of asset purchase facility released at 3:00 pm GMT+4) and the one of the European Central Bank (with the rate and the rate released at 3:45 pm GMT+4 and press conference at 4:30 GMT+4).

Analysts at BMO Capital Market note that there may be 4 possible combinations of the central banks’ decisions. Here they are:

- BoE does nothing, ECB does nothing;

- BoE increases quantitative easing, ECB does nothing;

- BoE does nothing, ECB cuts rates;

- BoE increases quantitative easing, ECB cuts rates.

According to the specialists, the last scenario represents the best trading opportunity. In such case the market may firstly react to the reduction of the interest rate differentials in favor of the UK and the single currency will decline versus British pound. However, investors will likely soon realize that the ECB’s action is meant to improve the situation in the euro area. As a result, the European bank equities and euro will advance. So, BMO recommends buying EUR/GBP on the dips, at 0.8550 stopping below 0.8500 and targeting 0.8700.

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Commerzbank: comments on EUR/USD

The single currency rebounded from Tuesday’s minimum at $1.3145 versus the greenback to the levels above $1.3300.

Technical analysts at Commerzbank note, however, that as long as EUR/USD is trading below the short-term resistance line at $1.3486, the outlook for the pair will remain negative.

The specialists claim that if euro breaches support in the $1.3145/1.3063 area it will fall to 2011 minimum at $1.2860.

According to the bank, the technical indicators on the daily chart remain negative. At the same time, the strategists say that there may be some consolidation after the abrupt slump seen so far.

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Re: October/06/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Oct 06, 2011 12:16 pm

HSBC cut growth forecasts for Asian economies

Analysts at HSBC reduced its 2011 and 2012 economic forecasts for the most of the Asian economies – Hong Kong, Indonesia, South Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. The specialists revised down their 2012 growth estimates for Japan and New Zealand.

As the reasons for such revision the bank cited the potential decline in exports due to lower demand in indebted Europe and economically weak United States, as well as falling stocks and currencies.

The predictions for China, India, Australia and the Philippines remained unchanged. Chinese GDP is seen adding 8.9% this year and 8.6% the next. According to HSBC, Chinese strength may help to ease pressure on other Asian economies.

Specialists at Standard Chartered think that in case of another financial crisis Asian central banks will be able to save the region by monetary stimulus and get out of any deep recession. At the same time, the economists say that Asia along isn’t able to remove such threat of the whole world.

BarCap: ECB will looosen its monetary policy

Currency strategists at Barclays Capital believe that the European Central Bank will ease its monetary policy today through both conventional and unconventional steps.

In their view, the ECB has several options, such as offering additional long-term refinancing operations, including 6 or 12 months' maturity, continuing of Italian and Spanish debt purchases, resume the covered bond purchase program, widening the interest rate corridor and reducing the benchmark interest rate.

Barclays thinks that the central bank will employ all of the measures mentioned above. According to the specialists, the ECB will widen the interest rate corridor – the difference between deposit rate and refinancing rate – from 25 to 100 basis points and cut the borrowing costs from 1.50% to 1.25%.

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Re: October/06/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Oct 06, 2011 12:20 pm

Reuters poll: expectations on USD/JPY

The poll conducted by Reuters among more than 60 banks and currency analysts showed that the specialists expect the pair USD/JPY to stay in the 77.00 area during the next 3 months, then rise to 78.00 yen in 6 months and to 80.00 in September 2012.

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Sakakibara: yen will strengthen versus euro and US dollar

The market thinks that Japan could intervene to boost EUR/JPY and support national exporters with Europe’s consent if it pledged to lend the amounts of euro bought in the process of intervention to the European Financial Stability Facility through buying EFSF bonds.

Eisuke Sakakibara, the former Japanese vice finance minister known as “Mr. Yen” for his ability to influence yen’s rate through both verbal and actual market interventions, believes that the United States and the euro area want to have weaker currencies in order to stimulate their economies.

Sakakibara says that Japanese economy undermined by the devastating earthquake in March is recovering while the American and European ones are under threat of recession. As a result, in his opinion, European authorities would criticize any Japanese currency-market intervention meant to encourage euro. Sakakibara points out that yen’s appreciation versus the single currency is based on the economic fundamentals, so any unilateral steps of Japanese monetary authorities will be useless as they change the situation only for a very short period of time.

According to the economist, the pair EUR/JPY that hit on Tuesday 10-year minimum at 100.74 yen will move down to the levels between 90 and 100 yen. As for the pair USD/JPY, Sakakibara expects it to drop below 75 yen and then below 70 yen in the coming weeks.

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Re: October/06/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Oct 06, 2011 7:33 pm

The BoE increased asset purchases. Analysts’ comments

The Bank of England has surprisingly increased the amount of asset purchases by 75 billion to 275 billion pounds. The analysts burst out with comments on this point.

BNP Paribas: there will be more QE in the coming months.

Deutsche Bank: pound will drop to $1.50 and will stay under pressure until the Federal Reserve hints at QE3.

Commerzbank: the size of QE2 shows that the BoE is really concerned with the nation’s economic situation. The specialists say that sterling’ slump won’t be as big as it was when the first round was introduced. The bank doesn’t see any inflationary risks. Commerzbank recommends being short on GBP/USD and expecting EUR/GBP to strengthen to 0.88.

Morgan Stanley: bearish outlook for British currency as the market was expecting QE2 not earlier than in November. GBP/USD is on its way down to $1.5175/1.5125.

Capital Economics: the threat of recession in Britain is bigger than the one of inflation. The analysts doubt that the measure will manage to improve economic outlook.

Danske Bank: the increase in the amount of purchases it bigger that the bank projected. The pair EUR/GBP is on its way up to 0.8750.

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Commerzbank: franc’s strengthening versus the greenback

Swiss franc is declining versus its American counterpart on the talk that the Swiss National Bank may conduct more measures aimed at depreciation of the national currency.

The SNB reported that its currency reserves rose from 253.4 billion francs in August to 282.4 billion francs ($306 billion) at the end of September. Last month the central bank pegged franc to euro and pledged to buy unlimited amounts of foreign currencies in order to keep the pair EUR/CHF above $1.20. Many investors now think that the SNB may raise this threshold, notes Commerzbank.

It’s necessary to note that the interventions increase the money supply strengthening inflation pressure. Switzerland’s consumer prices added 0.3% in September on the monthly basis after declining by 0.3% in August. The annual CPI growth was 0.5% versus the forecast of 0.3% and 0.2% advance in August.

The pair USD/CHF rose from the record minimum at 0.7064 hit on August 9 to the levels above 0.9200. Resistance for the pair is situated at 0.9370 (March 2010 maximum) and 0.9400 (50% retracement of the decline from 2010 to 2011). Support levels are found at 0.9220 (daily minimum), 0.9185 (September 22 minimum) and 0.9145 (October 4 minimum).

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