Forex Forecast

Focus On Next LTRO Risk appetite was boosted overnight by an article in the Financial Times claiming that the ECB’s next 3y LTRO (due on Feb 29) could see demand for up to EUR1 trn in cash, double the previous amount.

No Surprises From Brussels There were no major surprises out of Monday’s Eurozone summit. In French President Sarkozy’s words, the summit ‘went as planned’. However, this also means that there weren’t any positive surprises to offer to the markets, which may lead to further disappointments upon the Asia open.

Caution Into EU Summit The first EU Summit of 2012 has been greeted with a decidedly less optimistic tone than last week. After Fitch downgraded five Eurozone sovereigns on Friday night, the Italian treasury sold a total of EUR 7.5 bn worth of bonds, near the top of estimates.

Italian Auction Ahead Fitch downgraded five Eurozone sovereigns on Friday night shortly after Eurozone bond markets had closed. Italy, Spain, Slovenia were cut two notches each, while Belgium and Cyprus dropped one notch apiece.

First 2012 EU Summit Convenes The European Union opens its first summit of 2012 on Monday. Although no one has billed it as the meeting which could determine the fate of the euro, in our view there is very little room for complacency as buoyant markets could turn on the first sight of slip-ups.

US GDP Eyed Market focus will remain on the US on Friday, with the fourth quarter GDP, Michigan confidence and the quarterly Core PCE data is due. Our US economists are in line with consensus, looking for a rise to 3.0% q/q on the GDP print, a further sign of the relative out performance of […]

The USDJPY rally that began three days ago reversed completely overnight. Falling US Treasury yields in the aftermath of the dovish FOMC meeting were to blame. USDJPY had been following gradually ever since, and fresh long positions put on just ahead of the meeting finally had their stops triggered overnight. RBNZ Governor Bollard provided some […]

European equities ended Thursday on a buoyant note as stimulus from the Fed and hopes of further progress from Greece encouraged hopes that the worst is now over. The Stoxx 600 index for Europe is now back in bull market territory, having recovered more than 20% from its September lows and the EUR has responded […]

Post-Fed Rally The post-FOMC risk rally continued on Thursday with the dollar extending its losses in the European session. Data flow on Thursday was minimal and the markets were largely driven by yesterdays Fed actions. A short-dated Italian auction was well received, while Swedish data disappointed and SEK underperformed.

Dovish Fed Drives Risk The dovish FOMC decision continued to drive markets in Asia. Investors added more risk, inspired by the Fed’s pledge to keep rates on hold until late 2014. AUDUSD and NZDUSD saw most of the action, and even EURUSD crept higher.