13 August 2014
Rates & FX Market Update
European Markets Weighed by Ailing Confidence; Asian Markets
Mixed
Highlights
¨ Marginally
bearish markets overnight on declining confidence in Europe;
European govies mostly gained (-1 to -4bps), EURUSD touched a low of 1.3340
after a sharper than expected drop in August’s ZEW survey for both the
region (-24.4) and Germany
(-18.5) given weak business sentiment due to tougher sanctions on Russia.
EURUSD continues to face downside risks towards its near term support of
1.3325 on weaker HICP expectations from Germany
and France in addition to
the dismal CPI prints Italy
and Portugal.
Yields on 10y USTs rose 2bps to 2.449%, supported by an optimistic JOLTS report
ahead of tomorrow’s 10y new issue, which we opine should remain supported
given the weak risk sentiment. Else, BoJ MPC minutes provided little
guidance as the JPY remained largely unchanged amid thinner volumes; expect
the JPY to bounce around 102/USD in the near term.
¨ Asia
markets were mixed overnight; KRW saw better buying earlier in the
session, appreciating 0.40% against the USD, supported by the positive
unemployment data. Consensus continues to expect a 25bps rate cut from BoK
tomorrow. India’s
inflation prints disappointed markets (July’s CPI: 7.96% and WPI 5.1%), bolstering
expectations for RBI to leave the elevated rates through the fiscal year.
The INR was however relatively steady against the USD (+0.14%) on optimism
stemming from better IP data and confidence in the fiscal reforms.
¨ 1m
EURUSD NDF fell 0.15% as investors price in persistently weak signals from the
region. The pair continues to hug the lower bound of the RSI, and could trade
lower given the unrelenting weak price pressures in the region. With much of
the negativity fully priced into the EUR, investors should remain cognisant of
upside risks but we do not discount a relatively hostile break below its 1.3325
near term support.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.