TODAY's COMMENT
Risk aversion was riding high in Friday’s European trading session as concern over rapidly rising oil prices and jitteriness regarding upcoming 2nd quarter results and this week’s flood of macro economic news including the monetary policy meeting in the ECB, the release of the ISM indices from the US and the all important Non-farm payrolls on Thursday. The jitteriness took its toll on EURJPY and EURCHF and as the Russian central bank stated that it doesn’t rule out increasing their share of Swiss Francs in Russia’s forex reserves pressure on EURCHF build. Sentiment does seem to have improved somewhat in the course of Friday’s American trading session. With the Nikkei only slightly down this morning and a macro economic calendar without any ignificant news it looks like we are in for a relatively easy start to the week. Although we don’t expect any drastic moves today we expect pressure on EURCHF and EUR JPY to persist. Thus looking a bit further ahead we continue to see risks mainly to the upside on the JPY and the CHF.
Tomorrow morning the Reserve Bank of Australia announces interest rates and we expect that rates will be left unchanged at 7.25%. Furthermore as the tendency towards weaker macro economic data has continued since the last meeting we believe that the RBA is done raising rates this time around. The AUD has shown a remarkable strength lately and currently AUDUSD is headed for a test of the 96.50-area. Looking a bit further ahead though we believe in a correction lower on the currency cross but as the timing for a selling recommendation seems off for the time being we prefer to maintain a neutral stance.
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