Seeking Catalysts
With earnings season progressing steadily risk appetite in general is expected to hold well, but sentiment in FX markets seems to have stalled somewhat as the market goes in search of more catalysts to continue the price action displayed of late. Positioning aside, sooner or later some of the policy proposals, such as BoJ easing and OMT activation, will need to have the anticipated effect, especially as expectations have been raised so much. Any disappointment, be it in implementation schedules or efficacy will be problematic, especially for the outstanding leveraged positions waiting for real money to take an interest. As data and policy decisions are still a bit off the calendar, risk longs will need to depend on corporate earnings globally to not deliver any hiccups. However, the growth currently priced into equities is probably still a bit too optimistic, and Wednesday’s German revision in the 2013 growth outlook to 0.4% served a timely reminder of the challenges ahead. On Thursday US housing numbers are out, and New Zealand releases Q4 CPI later in the session. Overnight EURUSD traded 1.3270-1.3315 and USDJPY 88.14-88.80.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank