Daily Forex Snapshots

US Session: Financial Markets Beginning to Stablize Amid Lighter Volatility

October 21, 2008 6:58 PM CEST

G10 Advancers and Decliners vs USD

	Jpy	1.44
	Chf	-0.51
	Nzd	-1.68
	Gbp	-1.71
	Dkk	-1.85
	Eur	-1.84
	Cad	-2.31
	Sek	-2.87
	Aud	-3.20
	Nok	-3.87

Global Indexes

Current Level

% Change

DJIA Index	9,045.13	- 2.38
S&P 500 Index	958.95	- 2.68
NASDAQ 100 Index	1,713.59	- 3.19
FTSE futures	4,192.00	- 1.71
CAC futures	3,421.00	- 0.71
DAX futures	4,738.00	- 2.61
SMI Futures	6,207.00	- 0.48

World Markets

Current Level

% Change

Crude wti	70.21	- 5.44
Gold	769.10	- 3.49
Silver	9.95	+ 1.69
USD Index	84.13	+ 1.24
VIX	55.82	+ 5.38

Todays Calender

Estimates

Country / GMT

No Major Events Scheduled

Currency Tech

AUDUSD
R 3: 0.7355
R 2: 0.7239
R 1: 0.7076
CURRENT: 0.6857
S 1: 0.6883
S 2: 0.6731
S 3: 0.6496

EURJPY
R 3: 141.74
R 2. 139.36
R 1: 138.57
CURRENT: 134.26
S 1: 134.82
S 2: 133.38
S 3: 132.24

USDSGD
R 3: 1.5086
R 2: 1.4980
R 1: 1.4849
CURRENT: 1.4784
S 1: 1.4667
S 2: 1.4551
S 3: 1.4489

Market Brief

The Usd strengthened across the majors based on the recent trends in risk appetite among investors. The EurUsd fell over 160 pips to the high range of 1.31, while the UsdJpy declined to the 100 level. The GbpUsd continued yesterday’s pattern, trading through previous support to the 1.69 price area. Equity markets are lower in the US and Europe, which was accompanied by a much moderation in volatility. The Dow slid as much 234pts in intraday trading, but has since improved from the lows of the day. Bond yields declined across the treasury curve, as well as overseas in Europe with the 10yr in as much as 7bps. Commodity prices have scaled back with oil down over 5% to $70, and gold lower by 3% to the 773 level.

The French govt. took decisive action to inject $10.5bln into their top six banks in an effort to boost their capital position. This is one component of a larger strategy to recapitalize financial institutions, which will be primarily done through various types of sector lending. It is very likely we will see a return to economic fundamentals as policy makers express inflationary concerns and a need to revert back to analysis of account data. With upcoming GDP and CPI projections in December, we are likely to see easing in monetary policy. In the UK, CBI Industrial Trends orders dropped substantially to -39 vs. the prior reading of -26, as well as the estimate of -30. In addition, the BoE noted that easing in rates is likely to continue until they see some sort of recovery in the housing sector, as it is an integral component of the financial crisis. The EurUsd is likely to follow trend trading based on overall risk aversion in the marketplace. We hold our target for the EurUsd to 1.25 before year-end based on current market conditions and expectations for slowing growth.

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Asian Session - Markets Confidence Grows

October 21, 2008 9:25 AM CEST

G10 Advancers and Decliners vs USD

	JPY	0.42
	GBP	0.05
	CHF	-0.02
	CAD	-0.05
	SEK	-0.18
	DKK	-0.23
	EUR	-0.27
	NOK	-0.44
	NZD	-1.04
	AUD	-1.43

Global Indexes

Current Level

% Change

Nikkei 225 Index	9,306.24	+ 3.33
Hang Seng Index	15,252.57	- 0.46
Shanghai Index	1,958.53	- 0.78
FTSE 100 Index	4,282.67	+ 5.40
CAC 40 Index	3,448.51	+ 3.51
SMI Index	6,216.46	+ 1.91
DJIA futures	9,225.00	- 0.98

World Markets

Current Level

% Change

Gold	785.92	- 1.37
Silver	9.80	+ 0.15
VIX	52.97	- 24.68
Crude wti	74.50	+ 0.33
USD Index	83.08	- 0.02

Todays Calender

Estimates

Country / GMT

Interest Rate Announcement	2.00%	2.50%	CA / 13.00
MPC’s King speaks in Leeds	--	--	UK / 19.10

Currency Tech

Market Brief

The Usd was slightly weaker in the Asian session, after a strong rally yesterday. EurUsd, in choppy trading, jumped between 1.3300 and 1.3360, while UsdJpy rose in early trading to 102.16, before slipping down to 101.43 (carry trades followed a similar pattern). The US equity markets continued to rally, with the S&P 500 up 4.7% and Asian regional stock indexes are following with Nikkei up 3.39%. VIX fell a whopping -24.0% to 52.97 and gold fell to $793.82oz, as confidence continue to filter back into markets. Participants were broadly encouraged by the flood of official speak and corresponding markets reaction (interbank lending rates continue to fall), shaping a general sentiment that a global financial meltdown has been averted. The market widely embraced Fed Bernankes comments yesterday, specifically when he endorsed the idea of a second round of fiscal stimulus.

New Zealand's CPI q3 came out in line with market expectations, rising by 1.5% q/q and 4.1% y/y. Although inflation rose to an 18-year high at 1.3% q/q and above RBNZ expectations, the central bank expect that additional deterioration in the global economic growth prospects will help ease the pressure and is free to address the sharp down domestic downturn. We continue to expect the RBNZ to cut rates by 100bp this week. In a speech by RBA Governor Stevens, which really contained no real revelations, did highlight his view that “the likelihood of a global (financial) catastrophe has declined over the past couple of weeks.” In addition, the RBA minutes, which encapsulated the surprise 100bp cut (to 6.00%), were released. It is interesting to note that originally a 50bp cut was recommended, but staff upgraded to 100bp on the day of the meeting. However, due to the fluid landscape not much should be drawn from these minutes.

Today, the Central Bank of Canada is expected to cut interest rates but the market is split as to 25bp or 50bp. However, we are expecting a larger cut of 50bp. The central bank has already lowered rates 50bp, as part of the co-ordinated reduction. The BoC recently stated that slower global growth would weigh on Canadian exports, while credit conditions in Canada have tightened significantly and inflation expectations have decreased. A combination which favors a more aggressive accommodative monetary policy.

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