FX Comment : return to risk on the
margin, EUR continue to suffer vs
USD on relative macro differences
June 31 2010
Anders Eklöf FX/MM strategist
Swedbank FI/FX Research
FI/FX research
1
FX this week
Majors – slowly return to stable markets, EUR/JPY up a bit
EUR/USD trend down on relative rates outlook
China PMI expected to drop, but fiscal stimulus kept in place
and policy measures aimed at stabilize growth at high levels
•
Closed in US/UK today, but less stress in USD money markets. Markets continue to sit back and make more sober analysis on global
recovery
•
EUR/USD fails to gain as relative macro differences and interest rates speak for the downside. US NFP expected at 470k new jobs
due to census hiring, but the underlying labor market is recovering (see page 4)
•
China PMI expected to slow to 54 (55.7 in April) but commodity currencies/ EM take back lost ground vs funding currencies JPY and
EUR
•
CAD in spotlight as BOC expected to hike 25 bp to 0.50 % (Tuesday), USD /CAD towards 1.020. RBA to hold rates at 4.5 %
(Tuesday) but Aussie has sold off and rates expectations are lower. AUD/JPY continues to climb.
•
G20 meeting to discuss currencies on June 4-5 ? Japanese officials not happy with EUR/JPY at 110.
FI/FX research
2
FX this week
NOK and SEK : we stay long vs EUR
•
•
EUR/SEK will continue to drop on the back of last week’s strong
Q1 GDP numbers, strong gov finances and risk appetite returning
slowly
–
25 bp hike already priced in for July and September,
–
still very cautious pricing of next year’s interest rate outlook
(for good reasons) open question if the Riksbank combines
hikes with revising down repo rate outlook for 2011
–
We look for EUR/SEK at 9.40 in 3 m
EUR/NOK to lag EUR/SEK moving down ?
–
Norwegian macro a little bit slower and Norges bank will
have to slash GDP forecast in June (the opposite goes for
the Riksbank)
–
Still, Norges bank is almost priced to leave interest rates on
hold for the rest of the year
–
Also, Norges bank did not announce today to start buying FX
on the back of its petroleum revenues which was in the cards
–
We keep our EUR/NOK target at 7.70 in 3 m in the wake of
the relative difference in fundamentals
Gradually more stable markets should help scandies
FI/FX research
3
(Fri) Non Farm Payroll expected to remain strong in May – though the headline
number will be distorted by census hiring ( Market est 500k / prev 290k)
1000000
800000
0
-200000
-400000
-600000
-800000
Household Survey
2010:02:00
2009:09:00
2009:04:00
2008:11:00
2008:06:00
2008:01:00
2007:08:00
2007:03:00
2006:10:00
2006:05:00
2005:12:00
2005:07:00
2005:02:00
2004:09:00
2004:04:00
2003:11:00
2003:06:00
2003:01:00
2002:08:00
2002:03:00
-1000000
2000:02:00
•
•
200000
2001:10:00
•
400000
2001:05:00
•
600000
2000:12:00
•
Non Farm Payroll will be positively distorted in May
thanks to US Census Hiring (Exp 475k vs 290k in April)
A better gauge of the underlying labor market in May is
Private Payrolls expected at 225k vs 231k in April
We look for at least the consensus number in May due
to:
1. Trend in household survey employment is strong
(graph)
2. Temporary hiring is still elevated (26k in April)
3. Jobless claims in May is stable compared to April
2000:07:00
•
Non Farm Payroll
FI/FX research
4
(Tue) ISM has probably peaked at 60.4 in April – Slower momentum in
Leading Indicators hint of a lower ISM (Market est 59.5 / prev 60.4) ,
65
14
12
60
10
55
8
6
50
4
45
2
0
40
-2
35
-4
30
-6
2009- 2009- 2009- 2009- 2009- 2009- 2009- 2009- 2009- 2009- 2010- 2010- 2010- 2010M a r A p ril M a y Ju n e Ju ly
A ug
S ep
Oct
Nov Dec
Ja n
F eb
M a r A p ril
IS M (lh s )
L e a d in g In d ic a t o rs (% y o y ; rh s )
FI/FX research
5
FX Trade recommendations year to day
expiry or
projected
spot ref time to
reach
target
trade date
trade
nr
profit,vs loss
05-Jan-10
1
open, see 1below
USD/JPY call spread 1 by 1.5
91.9000
26-Jan-10
1
open
ref 1 converted to USD call /JPY put
89.7500
2
19-Jan-10
2
closed with loss
EUR put/SEK call RKO @ 9.65
10.1300
89 days
3
19-Jan-10
3
closed with profit
short EUR/SEK spot
10.1300
3m
strategy
row
1
6m
Trade specifics
total
cost in exit date
pips*
buy 1*** USD call /JPY put @ 95, sell 1.5 USD call/JPY put @ 105
175
buy 1.5 sold USD call /JPY put strike 105, cost 20 pips
195
buy EUR put / SEK call strike @ 10.05 RKO @ 9.65
440
sell 0.5 EUR/SEK spot @ 10.1250 , s/l @ 10.37, S/L move 10,05 on feb 18,S/P to 9.76 on 25-Mar,
return**
see row 9
KO 25-Mar
-440
29-Mar
1.8%
18-Feb
1.3%
5
28-Jan-10
4
closed with profit
short GBP/NOK
6
26-Feb-10
5
closed with loss
EUR/USD downside butterfly
1.3600
1m
buy 1 @ 1.35 EUR put /USD call, sell 2 @ 1.32 EUR put /USD call, buy 1 EUR put/USD call @ 1.28
40
expiry
-40
7
24-Mar-10
6
closed with profit
half of trade 5 closed with profit (105 pips recieved)
1.3600
1m
buy 1 @ 1.35 EUR put /USD call, sell 2 @ 1.32 EUR put /USD call, buy 1 EUR put/USD call @ 1.28
40
25-Mar
105
1.2185
20-Apr
0.27%
65
21-Apr
-65
23-Apr
0.0
17-May
1075
8
16-Apr-10
7
closed with profit
short NOK/SEK
9
16-Apr-10
8
closed with loss
long NOK/SEK vol
10
21-Apr-10
9
closed at break-even
short EUR/USD
11
27-Apr-10
10
see row 11&12
EUR/USD put spread 1 by 1 with up&in on sold put
1 to 3 m
sell 0.5 GBP/NOK spot @ 9,49, s/l @ 9,65
1 week
sell 0.5 NOK/[email protected], s/[email protected] ,target 1.20, pos closed at 1.2125 as Riksbank was quite soft
1 week
buy a 1.2150/1.2200 strangle expiry 21 April
1.3385
2 weeks
sell 0.5 unit EUR/USD @1.3385, s/l @ 1.3555, target new lows, 1.3280
1.3365
6,5 m
buy 1 EUR put/ USD call @ 1.33 and sell 1 EUR put / USD call @ 1.30 up&in 1.38, expiry Nov 12
340
12
17-Jun-10
11
closed with profit
half of trade 10 closed with profit
1.2300
6,5 m
buy 1 EUR put/ USD call @ 1.33 and sell 1 EUR put / USD call @ 1.30 up&in 1.38, expiry Nov 12
340
13
17-Jun-10
12
open
half of trade 10 changed to EURput/USDcall @ 40 pips cost
1.2300
6,5 m
buy 1 EUR put/ USD call @ 1.33 , expiry Nov 12
380
14
06-May-10
13
closed with profit
short NOK/SEK spot
1.2465
4 weeks
sell 0.5 unit NOK/SEK @ 1.2465 , s/l @ 1.26 , target 1.22, profit taken @ 1.2145 May 20
20-May
1.3%
15
06-May-10
14
closed with loss
short EUR/SEK spot
9.71
4 weeks
sell 0.5 unit EUR/SEK @ 9.71, s/l @ 9.82, target 9.55
6-May
-0.56%
16
07-May-10
15
open
EUR/SEK downside 1 by 2 put spread
9.81
2m
17
26-May-10
16
open
short JPY/NOK
7.30
1 to 3 m
sell 0.25 JPY/NOK @ 7.30 with s/l @7.60
18
26-May-10
open
short EUR/NOK
8.07
1 to 3 m
sell 0.25 EUR/NOK @ 8.07 with s/l @8.30
buy 1 EUR put/ SEK call @ 9.70 and sell 2 EUR put / SEK call @ 9.40 , expiry July 8
585
19
20
21
22
23
option positions in Italic writing
* net cost in price currency
spot year to day ret
4.1%
**return in % (spot) or return in pips (options)
*** notionals in units
FI/FX research
6
IN FOCUS - WEEK 22
• Monday
- JPN
- Sweden
- Norway
- EMU
- EMU
- EMU
Industrial production
Economic Tendency Survey
Retail sales
M3
Business Climate Indicator
CPI Estimate
• Tuesday
- Sweden
- Sweden
- Norway
- EMU
- EMU
- Sweden
- US
Swedbank PMI Manufacturing
Financial Stability Report
PMI Manufacturing
PMI Manufacturing
Unemployment Rate
Speech by Lars Nyberg
ISM Manufacturing
• Thursday
- EMU
- UK
- EMU
- US
- US
PMI Services
PMI Services
Retail Sales
ADP Employment Change
ISM Non-Manufacturing
• Friday
- EMU
- US
- US
- Sweden
GDP
Change in Nonfarm Payrolls
Unemployment Rates
Speech by Lars Nyberg
• Wednesday
- Sweden
- US
FI/FX research
Current Account
Pending Home Sales
7
Swedbank FX forecasts
2010 05 31
1 month
3 month
6 month
12 month
USD/SEK
EUR/SEK
GBP/SEK
NOK/SEK
CHF/SEK
CAD/SEK
AUD/SEK
JPY/SEK
EEK/SEK
LVL/SEK
LTL/SEK
RUB/SEK
7.834
9.638
11.362
1.213
6.778
7.464
6.637
8.572
0.616
13.769
2.791
0.254
7.683
9.450
11.118
1.204
6.750
7.683
7.145
8.173
0.604
13.500
2.737
0.270
7.833
9.400
11.059
1.221
6.714
7.680
7.363
8.160
0.601
13.429
2.722
0.280
8.174
9.400
11.750
1.221
6.714
7.639
7.520
8.341
0.601
13.429
2.722
0.303
8.174
9.400
12.051
1.221
6.861
7.298
7.030
7.785
0.601
13.429
2.722
0.327
EUR/NOK
EUR/USD
EUR/GBP
EUR/CHF
EUR/JPY
7.943
1.228
0.848
1.422
112.290
7.850
1.230
0.850
1.400
115.620
7.700
1.200
0.850
1.400
115.200
7.700
1.150
0.800
1.400
112.700
7.700
1.150
0.780
1.370
120.750
USD/JPY
USD/CAD
AUD/USD
GBP/USD
USD/RUB
91.390
1.050
0.847
1.448
30.814
94.000
1.000
0.930
1.447
28.500
96.000
1.020
0.940
1.412
28.000
98.000
1.070
0.920
1.438
27.000
105.000
1.120
0.860
1.474
25.000
FI/FX research
8
Contact information
Research - Macro, FI & FX
VP
Cecilia Skingsley
Tel: 46 8 700 99 76
e-mail: [email protected]
Macro
Knut Hallberg
Tel: 46 8 700 93 17
e-mail: [email protected]
Macro
Per Selldén
Tel: 46 8 700 99 01
e-mail: [email protected]
FX/MM
Anders Eklöf
Tel: 46 8 700 91 38
e-mail: [email protected]
Emerging markets
Hans Gustafson
Tel: 46 8 700 9147
e-mail: [email protected]
Macro
Karl-Johan Bergstrom
Tel: 46 8 700 98 04
[email protected]
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