Forex Forecast

NZ Intervention Still Unlikely New bank lending in China increased by more than expected overnight, giving the Australian dollar (and risk appetite more generally) a temporary boost.

Calm Before the Storm? Risk appetite was soft during the New York session as investors braced themselves for the events later in the week. EURUSD momentarily broke above 1.28, but the lack of any fresh incentives kept it in ranges.

Optimism Tempered The euro was broadly softer overnight as investors are starting to digest the implementation issues surrounding Europe’s latest efforts to resolve the crisis.

Spain To Play For Time? The euro softened a little during the Asia session after the El Economista newspaper claimed over the weekend that Spain may wait until after regional elections on Oct 21 before making a formal application for EFSF aid.

Weak Payrolls Pin USD Down USD was on the back foot after a weak payrolls report on Friday increased hopes of a new QE announcement in the FOMC meeting later this week.

Payrolls Due Risk remains in rude health as European markets rallied further on the back of a strong showing by Asian stocks. In addition to the positivity generated by the ECB’s new OMT,

Risk Surges Post-OMT Sentiment was buoyant during the Asia session as the ECB’s policy announcements, reports of more stimulus from China and hopes for a strong payrolls print today have led to a return into risk assets en masse. 5% in 2012 and from 1.6% to 1.9% in 2013 – making it less likely for […]

ECB Announces OMT Risk assets surged during the New York session following the ECB policy meeting and positive data releases in the US. The ECB left its benchmark rate unchanged at 0.75%.

Riksbank In Surprise Cut Three central banks are scheduled for decisions today and the Riksbank was the first to spring a surprise with a 25bp cut (cons. 1.50%).

Draghi’s Deliverance Three policy decisions are due today but we expect the market to express interest in only one central banker. ECB President Mario Draghi’s intentions today appear to have been well flagged already by a series of leaks and passive acknowledgements by other government officials.

Up Next – ECB, BoE And Riksbank The BoC kept its policy rate unchanged at 1.0% as expected. It also continued its hawkish bias noting “some modest withdrawal of the monetary stimulus may become appropriate” if the economic expansion continues.