Currency markets – Feels like waiting for the next hurricane.

EUR/USD (1,2975): Trading around 1,3000 is slightly above the current range and also a sign that my bearish view on stock markets suffers short term. It is still all about equities so it’s hard to come up with anything new regarding FX compared to the comments from the last weeks. I will keep the FX views fairly short for the same reason.

I have the long term view that the greenback will be hurt from the growing US debt and investor uncertainty. Short term, on the other hand Europe has the well known and serious credit exposure in CEE. The markets act as had the risks disappeared – sorry but they haven’t. Like in the prior weeks I go for a possible downwards move in EUR/USD linked to CEE, but use FX options as the right fundamental move is higher.

In that respect, I have just a small note on the new federal economic plan made by the new US government. When people want to sell something to you, then always read what is printed in small. The budgets are based on the assumption that the US economy only will shrink with 1,2% this year and that the average growth the following 4 years will be 4%. I don’t believe in that condition, and the risk is that investors start to have the same unpleasant thinking. The Chinese officials probably also noticed what was printed in small (please see the China comments).

Given the currently more positive equity market than expected I adjust the range from 1,2450 / 1,2950 to 1,2650 /  1,3150. Though, I don’t expect that a new trend has started.  

Target: Range 1,2650 – 1,3150.

  
EUR/GBP (0,9250) – GBP/USD (1,4050): I simply stay with the bearish view on Sterling. Many bad news are priced in as usual, though there is still downside room for GBP. It was remarkable that GBP only very temporary got support from the equity rally during last week. It confirms how offered Sterling is. The unemployment figures on Wednesday are important (exp. 6,5%).

Targets: EUR/GBP  0,9500     GBP/USD range 1,3750 – 1,4250 .

EUR/JPY (127,40) – USD/JPY (98,20): Moving closer towards year end also means sideways to higher USD/JPY in my world, as it would be suitable for accounting reasons. No good news out of Japan which should argue for a fundamental sell off in JPY but I don’t think that trend has started yet. The Bank of Japan report on Wednesday certainly is worth to watch. They can’t tell any good stories, but more about how bad they think it is (they can give the report a bias, but that was mainly a problem during the prior governors period of service).

Targets: EUR/JPY range 125,00 – 130,00  USD/JPY 100,00 followed by 102.

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