Daily Forex Snapshots

Equity Markets Fall, Flight to Quality in the Usd

October 15, 2008 10:23 PM CEST

G10 Advancers and Decliners vs USD

	Jpy	2.00
	Chf	0.34
	Gbp	-0.70
	Dkk	-0.92
	eur	-0.95
	nok	-2.00
	Cad	-2.50
	Sek	-2.87
	Nzd	-3.09
	Aud	-5.32

Global Indexes

Current Level

% Change

DJIA futures	8,577.91	- 7.87
S&P 500 Index	907.84	- 9.04
NASDAQ 100 Index	1,628.33	- 8.47
FTSE futures	3,953.00	- 10.15
CAC futures	3,256.00	- 10.33
DAX futures	4,717.00	- 9.87
SMI Futures	5,953.00	- 5.21

World Markets

Current Level

% Change

Crude wti	74.25	- 5.57
Gold	848.03	+ 1.35
Silver	10.35	- 5.57
USD Index	82.05	+ 0.84
VIX	69.35	+ 25.79

Todays Calender

Estimates

Country / GMT

No Major Events Scheduled

Currency Tech

AUDUSD
R 3: 0.7425
R 2: 0.7357
R 1: 0.7239
CURRENT: 0.6954
S 1: 0.6872
S 2: 0.6435
S 3: 0.6331

EURJPY
R 3: 144.61
R 2: 144.97
R 1: 141.74
CURRENT: 137.64
S 1: 136.96
S 2: 134.23
S 3: 132.24

USDSGD
R 3: 1.4980
R 2: 1.4849
R 1: 1.4794
CURRENT: 1.4693
S 1: 1.4551
S 2: 1.4489
S 3: 1.4458

Market Brief

The Usd seems to be the currency of choice for risk averse investors, gaining across the majors. The EurUsd fell approximately 100 pips to the low range of 1.35, while the UsdJpy also retraced back to the high 100 price area. The GbpUsd slipped roughly 50 pips to the mid 1.73 area based following the general trend trading in the market place. Equity markets retracted in the US and Europe with the Dow down over 500pts, falling back below the 9000 level. Bond yields collapsed with the 2yr treasury tighter by 22bps at 1.59% and the 10yr in by 10bps at 3.98%. Commodities declined with the exception of gold which rose nearly 1% to 843, investors are clearly migrating to more secure assets in today’s session.

There was light data out of the Eurozone today, the Euro fell against the dollar which is consistent with the risk aversion trade we’ve seen recently. As the equity markets selloff, both the Euro and Cable follow suit, as well as oil which seems to be the new risk aversion. In the UK, employment data worsened with the ILO figures rising by 0.2% to an unemployment rate of 5.7%. Economists expect the unemployment to rise in the near-term with weaker corporate earnings and overall slowing growth.
As economic fundamentals come back into play we are likely to see further declines throughout the G10.

The dollar displays a higher degree of correlation to price behavior in treasuries and equities, this trend is likely to continue until the market move towards a stage of stabilization. We hold a bullish stance on the Usd versus the majors, and a strong likelihood that central banks will be prompted to cut rates further closing the gap in yield differentials.

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Asian Session - Euphoria Wearing Off

October 15, 2008 10:06 AM CEST

G10 Advancers and Decliners vs USD

	JPY	0.67
	GBP	0.02
	CHF	-0.30
	EUR	-0.33
	DKK	-0.35
	CAD	-0.46
	AUD	-0.72
	NZD	-0.74
	SEK	-0.80
	NOK	-1.46

Global Indexes

Current Level

% Change

Nikkei 225 Index	9,547.47	+ 1.05
Hang Seng Index	16,210.02	- 3.70
Shanghai Index	1,994.67	- 1.12
FTSE 100 Index	4,365.50	- 1.08
CAC 40 Index	3,591.40	- 1.02
SMI Index	6,213.86	- 0.74
DJIA futures	9,294.00	- 0.74

World Markets

Current Level

% Change

Gold	846.48	+ 1.16
Silver	10.98	+ 0.13
VIX	55.13	+ 0.25
Crude wti	79.00	+ 0.47
USD Index	81.54	+ 0.21

Todays Calender

Estimates

Country / GMT

Unemployment Rate (Sep)	2.9%	2.8%	UK / 8.30
CPI (Sep)	0.1%(+3.6%	(+3.6%)p	EZ / 9.00
Core CPI (Sep)	(+1.9%)	(+1.9%)	EZ / 9.00
Norges Bank Interest Rate Announcement	5.25%	5.75%	NO / 12.00
Producer Price Index (Sep)	-0.4%(+8.7	-0.9%(+9.6	US / 12.30
Core Producer Price Index (Sep)	+0.2%(+3.8	+0.2%(+3.6	US / 12.30
Retail Sales (Sep)	-0.7%	-0.3%	US / 12.30
Empire State Manufacturing Index (Oct)	-10.0	-7.4	US / 12.30
Business Inventories (Aug)	+0.5%	+1.1%	US / 14.00
Fed’s Bernanke Speaks in New York	--	--	US / 16.15

Currency Tech

Market Brief

The Usd was moderately stronger in the Asian session, as equity markets took a tumble, prompting concerns that the crisis has not turned a corner. The EurUsd slipped from 1.3690 to 1.3536, while the UsdJpy fell from 102.19 to 101.13. Wall Street started the session higher and feeding the markets optimism, before dropping into negative territory, as weak US data was released (S&P closed -0.53%) and initial bailout package euphoria wears off. US corporate earnings downgrades weighed on the S&P500 and, which saw Eur, Aud and Nzd under renewed pressure and the Jpy and Usd bid. The VIX index remains stubbornly above 50, which suggests that despite extensive government and central bank attempt to grease the money and credit markets investors remain anxious. Asian equity markets are following and European stock futures are currently pointing to a mixed opening. Crude prices continued to decline, as optimism surrounding global demand wanes on a daily basis. A point to mention is how quickly the markets reacted to the negative US yesterday, perhaps a signal that fundamentals are back in focus as participant attempt to extrapolate the underlying economic effect of the crisis.

In the European session, we expect the Norge Bank to cut rates 50bp to 5.25%. Following Wednesday coordinated central bank action and the Norge Bank decision to move their monetary policy meeting up two weeks, there is little reason to deviate from consensus. However, there is growing speculation that a larger cut might be in the works, especially since a report Monday quoting Governor Gjedrem in saying rates need to come down lower than expectations.

In the UK, with the economy deteriorating and the uptick in claimant count, we expect Unemployment to pick up the pace over the last few months. And finally in the Eurozone the second estimate of CPI inflation should validate that inflation is indeed easing. The core driver behind the decline is expected to be a fall in energy price inflation.

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