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Name: Peter Rosenstreich
Title: Chief Market Analyst
Company: AC Markets
Date: 25/07/2008
Time: 07:24 CET
Channel: CNBC Europe
Duration: 4 mins 7 secs
Interview with Peter Rosenstreich
Goeff Cutmore
Let’s focus back on the currencies and where we’re moving on these prices right now. Dollar/Yen:
106.76. We’ve got a bit of action on Euro/Dollar here as well at 1.57. Peter Rosenstreich joins us.
He’s Chief Market Analyst at Advanced Currency Markets. Peter, I’m surprised not to see the
dollar get a little better support from that poor IFO, really, that negative data coming from the
Eurozone.
Peter Rosenstreich
Well, I think the reason it probably didn’t get as much balance as you expected or the market had
anticipated was the fact that, just shortly after, the payroll numbers came out and the rest of the
US fundamental data just points to, or sort of highlighted, the fact that the US economy is still in a
dire situation. The market picked up on that pretty quickly, and I think that will continue
throughout today’s session.
Goeff Cutmore
But, again, not a great deal of impact even from the US data which was pretty poor as well.
Peter Rosenstreich
Yes.
Goeff Cutmore
I take on board the point you’re making here, but if the currencies aren’t going to react to
economic fundamentals, then what should we be looking for?
Peter Rosenstreich
Well, you know, the markets have been trading very much on a macro basis, looking at not only
the geopolitical scene but also energy prices, yield prices, the total equity market condition and
the fact that we are in the summer session and things are a little bit lighter. While volatility has
been coming down, the actual trading volume is a little bit on the lighter side. There’s less
commitment on traders to really look at the underlying fundamentals and pick a directional trade
rather than just look at the market sentiment and try and extrapolate which way to move from
there.
Martin Baccardax
Peter, I’m astonished, really, at the bids that we’re seeing for US dollar this week, largely because
I just come back to the interest rate differential. If you can get 180 basis points pick up going into
the Euro, it really does say a lot about the growth characteristics of the Euro-land economy,
doesn’t it, that people are so willing to buy into the dollar when they have to give up that many
basis points?
Peter Rosenstreich
Yes, correct. I think that changing sentiment is clearly beginning to price in with the dollar
strength, and people are starting to pick up dollar denominated assets in a greater pace than
previously before. That goes to our longer term outlook for the dollar which is a period of dollar
strength going down below the 1.54 levels, down to the 1.50 levels, as a fact that Euro - ECB
rates need to come down and the underlying fundamentals are going to deteriorate in the
Eurozone.
Martin Baccardax
Peter, I want to ask you your thoughts on Sterling as well. We sold off a little bit off the back of
those weak retail sales, but maybe not as significantly as I would have thought. We’ll get first
print of second quarter GDP, and then, of course, the inflation report in the early part of next
month. I’m of the view that this is going to give us almost perfect clarity into where the MPC is
going. It would seem to me that rate cuts are far more likely than rate hikes. What are your
thoughts?
Peter Rosenstreich
I agree with your theory of rate cuts over rate hikes. I’m not sure that we’re going to get the
clarity because we continue to see the inflation - our expectation that inflation in the UK is going
to continue to climb higher. The downside risk to the cable is very, very much apparent with
today’s first print of GDP. There is a high probability that we actually don’t hit that point to
expected monthly figure, and we actually grind to a complete halt. Looking at the services, the
client and the service sector in the UK as well as the dismal retail sales, there is an enormous risk
in the underlying domestic situation in the UK. That’s going to play very strongly on the cable and
the ability for the BOE to even lean towards raising rates.
Goeff Cutmore
Peter, thanks for your time this morning, Sir. Peter Rosenstreich, Chief Market Analyst at
Advanced Currency Markets.
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