- USD Event risk: Expect headline retail sales to fall a record 3% (at least the current version of the report that dates back to 1992), led by collapsing auto and gasoline sales. Consensus substantially understates the downside risks at -1.2%. Fed Chair Bernanke and Trichet speak at the same Central Bank conference on Friday. Bias: Sticking with a short USD bias for another week. Funding pressures continue to wane. Such is the availability of USD funding that authorities may if anything need to reverse some liquidity provision. The TAF schedule over the next 2 mths for example will see $900bn in combined 28 and 84 day funding available over the new year - more than enough. The bottom line is that the “funding” related bid for the USD has been removed. And, looking through the intraday volatility virtually all “stress” indicators across credit, equity, bond and FX markets are trending lower too. Simple regressions suggests that the DXY is about 3-4 big figures overvalued against the current level in the US investment grade CDX index, VIX and LIBOR/OIS. And EU-US yield spreads across the entire spectrum of the curve are starting to nudge back in EUR’s favour. Beyond that (i.e. early 2009) market expects further substantial growth downgrades outside the US and more aggressive easing by other central banks to give the USD a renewed lift.
- CAD Event risk: Housing starts (Mon) will in all probability ease back in Oct in line with consensus. Keep an eye on BoC Deputy Governor Jenkins comments (Wed) too for hints on the BoC’s next meeting (9 Dec). Markets are currently pricing in 42bp of easing. Bias: EUR/CAD crashed through 1.54 target this week but the cross still shows promise all the way down to 1.47 (currently 1.51). Both gold and oil are showing tentative signs of stabilisation. Relative value considerations continue to strongly favour CAD too - local data have been soft but recent data out of Europe, the UK and the US have been much weaker. Rate markets get the message with “only” 75 bp in BoC easing expected through to mid-2009 vs more 200bp in easing from the BoE and 175bp from the RBA. FX markets will get the message eventually.
Next week event risks - United States and Canada
November 9th, 2008 · No Comments
Tags: Forex Market
0 responses so far ↓
There are no comments yet...Kick things off by filling out the form below.
You must log in to post a comment.