Forex Forecast

More QE? The weaker than expected US employment data – total payrolls up 69k; private payrolls up 82k; unemployment rate up to 8.2%; ‘underemployment’ rate up to 14.8% – effectively conspired to magnify expectations of further Fed easing against the backdrop of a sharp decline in US equities.

Dollar Bid Pre-Payrolls Growth indicators failed to inspire the markets on Friday, with lea\d indicators across the Europe and Asia adding to the fears of further economic weakness ahead in the global economy. Risk aversion continues to sweep through FX markets, Brent crude dropped through $100 for the first time in 2012, and DXY continued […]

China PMI Dents Aussie The Australian dollar fell sharply overnight after the official China PMI for May came in well below expectations at a mere 50.4 (cons. 52.0). The speed of decline since April’s reading of 53.3 was striking, and it didn’t help matters that a private sector PMI survey published shortly afterwards was revised […]

USDJPY Drifts Lower Generally softer than expected US data served as a reminder that not all the risks are confined to Europe: the May ADP private payrolls print came in at 133k; initial claims rose 10k to 383k; and the Chicago PMI fell to 52.7.

Danthine Stirs EURCHF EURCHF briefly returned to the spotlight after the SNB’s Danthine suggested that negative rates up to 50bp may not be harmful, referencing the policy of the Riksbank in 2009. His rhetoric remained firm otherwise and said that the SNB will continue to enforce the CHF cap with utmost determination.

RBA To Cut Next Week The latest batch of Australian economic data overnight confirmed that non-mining sectors of the economy continue to lose momentum. As a result, our Australia economics team now thinks the RBA will lower the cash rate by 25 bp on Tuesday, and are still looking for a total of 50 bp […]

Euro Aversion After a brief pop higher on the back of the some seemingly positive headlines from the EU Commission, it was all downhill for EURUSD, which fell below 1.24. Indeed, the Commission’s suggestion that direct bank recapitalisations via the ESM might be “envisaged” and the Eurozone should move towards a “banking union” were justifiably […]

Spain Concerns Continue The euro jumped 20-pips on the headline that the EU Commission could envisage direct recapitalization of banks by Eurozone permanent bailout fund (ESM). While the headline is positive, it is not unexpected and it would require a change in the ESM treaty to get the policy through.

Spain Takes Centre-Stage Price action overnight was dominated by weaker-than-expected Australian retail sales which pushed AUDUSD back below 0.98. The miss also tripped up the euro, sending EURUSD down to a new 2-year low of 1.2458.

More Pain In Spain The fact that EURUSD was so easily knocked below 1.25 on the ratings downgrade of Spain by Egan-Jones from BB- to B serves reminder of the heightened market sensitivity to any bearish Spanish headlines and the scope for continued disappointment.

China Stimulus Hopes Dashed The AUD and EUR reversed their gains versus their dollar in Europe as a report from the news agency Xinhua quashed expectations of fresh large-scale stimulus from China. Earlier, domestic reports had circulated suggesting that new stimulus measures were being discussed, up to the size of CNY 4trn – but these […]