Monthly Archives: May 2011

The cost of agreement between Hungarian banks and the government on FX mortgages looks workable. The currently proposed 180 CHF/HUF rate translates into a cost of HUF30-40bn per year, equivalent to 0.15-0.2% of GDP) and is much more controlled than full scale conversion.

* The Baltics are firmly in ‘normalisation’ mode.  Following unsustainable gains in GDP over 2006-07, economic activity collapsed in 2008-09.  Last year saw stabilization on this front which has now translated into concrete signs of recovery.

During the first four months of 2011 eurozone tension eased, although trouble at the periphery never went away. However, with yield spreads starting to blow out across the region (the 10 year German-Spanish yield spread posted a new wide for the year late last week) it would appear tension is again building.

Recurring EURUSD Pattern? Friday 13th May – European Open saw buying of EURUSD up to highs of 1.4337 Friday 20th May – European Open saw buying of EURUSD up to highs of 1.4427 Both days saw their peak between 8.00-8.15am GMT

TOP S&P puts Italy on downgrade watch (implying a 1 in 3 chance of downgrade over next two years) citing weak outlook for growth and reduced prospects for slashing its debt mountain.

G10 Currencies EUR: “Soft restructuring“, “re-profiling“ – since the Eurogroup meeting last week the head of the Eurogroup Jean-Claude Juncker and EU Commissioner Olli Rehn have been suggesting repeatedly that there will be a restructuring of Greek debt.

– AUD, KRW and MYR lead weakness vs USD, EURUSD back below 1.41 – We remain bullish euro despite data headwinds – US data this week likely to be mixed with risks to the downside

Today’s highlights: EUR/USD: Plunge back from head fake above 1.4341 leaves risk through key 1.4038/20 to negate basing effort.  Risk then to 1.3655 into June

Overnight equity markets Nikkei          -1.52%          9’460.63 S&P500          -0.77%          1’333.27 Dow             -0.74%          12’512.04 Nasdaq          -0.71%          2’803.32

HK wrap from G10 trader Fridays risk off move continued in Asia from the outset as Noyer comments early in our session set the tone and sent EUR through 141.00. HSBC’s FLASH PMI for China  came in soft and added to the aversion theme.

Foreign Exchange EUR/USD – focus on the 200 week ma at 1.4000. Targets 1.3370 then 1.3463/1.3390. The US dollar index is approaching channel resistance at 76.80 GBP/USD – Targets one year uptrend at 1.6080.USD/SEK has based – Previous 11 month downtrend now acting support – maintain positive bias.