[Monday 22nd October 2007]
[Market Briefs]
- New Zealand Holiday.
- G7 calls on China to allow accelerated appreciation of CNY, no mention of EUR,
USD or JPY in communique, FX should reflect fundamentals. - G10 - Hedge funds have not been a major source of market instability - Rtrs
- Japan MoF - Japan will not aggressively manage its FX reserves - Rtrs
- ECB Trichet - G7 sees high volatility, some overshooting in FX, monetary
policy must remain vigilant, oil and commodities prices eyed - Rtrs. - Turkey, weekend rebel strike increases risk of Turkish military action.
- U.K New Chairman appointed at Northern Rock Following weekend resignation.
- Poland. Zloty up following opposition election victory, reform optimism cited
- U.S ex-Fed chair, Greenspan current account gap could hurt-Reuters
- U.K Black clouds on the horizon after years of plenty-Kaletsky, Times
- U.K Barclays & RBS line up Fed for $30bn - Sunday Telegraph (B1)
- U.K Mervyn King could have stopped crisis in UK banking-Sunday Telegraph (B7)
- E&Y Item Club: UK housing market “will avoid crash” (Sunday Times)
- ECB"s Stark says EZ inflation risks have increased-Rtrs
[Looking Ahead - Economic Data]
- 12:30 USD Sep Chicago Fed National Activity Index (prev -0.21 (MA3))
[Looking Ahead - Events]
- 11:30 USD Fed Gov Kroszner (voter) at the Int"l Bankers" breakfast
- 23:00 USD FRB Chicago’s Evans (voter) speaks on the economic outlook
[Currency Summaries]
[EUR/USD] Spot gapped higher into the Asian open as the Dollar struggled in the
aftermath of the G7 meeting. 1.4349 traded in several directions but the 50 mark
held and as a result option barriers have remained in play. EUR/USD spent the
rest of the session pulling back with the failure into 1.4350 also leaving stops
in place in the 1.4355 area. Into Europe and the bids in the 1.4300/10 area were
in focus after a bout of early German and fund sales. However, these managed to
support the price for a long period before spot made a dash for the 1.42"s last
on into the European morning. Downside stops tripped below 1.4285, 75 and 70 to
force the drop back into the 50"s but further spec sellers entered the fray and
further stops were run amid the break below 1.4250. 1.4217 the latest lows.
[JPY] A weak Dollar theme at the start of the week and USD/JPY has been a leader
and continued to under perform despite a slump in the European units. USD/JPY
traded to 113.25 lows in Asia, caught a bid to 114.30 as the Nikkei lost
significant ground but then lost its footing as Europe sold the Buck. London
lows of 113.60 found bids but EUR/JPY losses have slowed the Dollar recovery.
EUR/JPY peaked at 163.73 and has fallen to 161.70 as the Dollar fights back.
Still very much a Dollar story and more so following another insipid G-7.
[GBP/USD] slumped to a late London morning five-day low of 2.0355 as long
positions were liquidated on the back of across-the-board USD gains. GBP/JPY
simultaneously fell to one-month lows sub-232.00. A UK clearer is touting
further downside risk towards 230.05/227.55. Another UK clearer is targeting
225.00. Today"s Asian session range was 2.0471-2.0560. [EUR/GBP] respected
today"s 0.6972-0.6994 Asian session range through the London morning.
[CHF] The Franc rallied into the European open as risk aversion rose and carry
trades were bought back. USD/CHF eyed the 1.1602 overnight lows but was unable
to retest the support into the figure as the US unit soon rebounded. USD/CHF
bounced off 1.1616 to find standing offers into the 1.1650/55 area but this
supply was soon absorbed and spot began stop hunting amid the broader Dollar
bounce. The price was quickly bought into the 1.17"s with standing supply up
into the 1.1720"s now attempting to stall the appreciation. EUR/CHF offer into
the 1.6670"s have capped the cross but with the USD holding the focus the EUR
cross has largely been left to drift with bids into 1.6640 now eyed.
[USD/CAD] A busy run into the weekend has given way to slightly calmer price
action for the Loonie. The threat of a further weakening of the Big Dollar
remains very real as fears of a U.S recession knock equity markets hard and
there is little on the Canadian fundamental side to warrant a significant
turnaround in the Loonie"s fortunes but for the early Monday session we have
seen USD/CAD trade higher. The 0.9700 level stalled the rise for a while but
early North American demand has seen price bounce to 0.9785 from London lows of
0.9660.
[AUD/USD] plumbed a 1-month low of 0.8781 late in the London morning, as the USD
and JPY racked up across-the-board gains, having run into resistance at 0.8915
(today"s Asian session top) in early European trade.
[NZD/USD] revisited today"s Asian session one-month low of 0.7386 late in the
London morning, as the USD and JPY racked up across-the-board gains, having
scaled an intra-day peak of 0.7503 in early European trade.
[FX OPTIONS] Spot [USD/JPY] recovered from 113.25 Asian lows to 114.30, where it
remained until Europe opened. Market staged a brief period of consolidation,
before trading back to the 113.60 level. Vols remain sensitive to spot moves -
1m atmf peaked 11.75 in Asia, before sliding back to 10.9. Contract paid
various levels back out to 11.45 as spot traded lower. 1yr atmf paid 8.4, after
slide from 8.7-8.35 in Asia. Short dated downside demand at the fore - Thursday
113.95 paid 17.25 in good size (NB - USD 3bln 113.95"s already due to roll off
New York cut Thursday). Thursday 112.10 paid 20.5 and a 1wk 112.00 paid 15.75.
3m 10 delta risk reversal paid 7.0 JPY calls on USD 750mln a leg in Asia. Spot
[EUR/USD] reached a new record high at 1.4349 in Asia. 1.4350 barriers holding
firm, with more at 1.4400 (EUR 5mln 1.44 expires today). Early gains on USD
index hit the pair however - down from lower 1.43"s in early Europe to a 1.4217
base. 1m atmf vol saw some early trade above last weeks 7.05-7.1 highs, market
traded 7.15 and held this level on the spot slump. 3m atmf trades 6.7 and 1yr
6.425, having seen a rack of interest at 6.325 late last week. Spot [Cable]
continues to trade good intraday ranges and this helping to support the shorter
dates and front end of the vol curve.
[Issuance]
-
15:00 USD Treasury announces 2- and 5-yr notes
-
15:00 USD Treasury announces 4-week bills; auction Oct 23
-
17:00 USD Treasury auctions $34 bln3- and 6- month bills; settle Oct 25