Daily Forex Snapshots

European Session: US Budget Deficit Swells

October 23, 2009 9:59 AM CEST

G10 Advancers and Decliners vs USD

	SEK	0.33
	AUD	0.35
	NOK	0.17
	NZD	0.13
	GBP	0.10
	DKK	0.01
	EUR	-0.02
	CHF	-0.04
	CAD	-0.20
	JPY	-0.44

Global Indexes

Current Level

% Change

Nikkei 225 Index	10,282.99	+ 0.15
Hang Seng Index	22,537.94	+ 1.47
Shanghai Index	3,091.87	+ 1.32
FTSE futures	5,183.50	- 0.84
DAX futures	5,834.00	+ 1.03
SMI Futures	6,454.00	+ 0.79
S&P future	1,092.30	+ 0.13

World Markets

Current Level

% Change

Gold	1,062.00	+ 0.17
Silver	17.68	+ 0.11
VIX	20.69	- 6.88
Crude wti	81.48	+ 0.35
USD Index	75.20	+ 0.12

Todays Calender

Estimates

Country / GMT

"Flash" manufacturing PMI, index Oct	50.0	49.3	EUR / 07.58
"Flash" services PMI, index Oct	51.3	50.9	EUR / 07.58
"Flash" composite PMI, index Oct	0.2 (-4.6)	51.1	EUR / 07.58
German IFO business climate, index Oct	92.0	91.3	EUR / 07.58
German IFO current assessment, index	88.0	87.0	EUR / 07.58
German IFO business expectations, index	96.3	95.7	EUR / 07.58
Preliminary Q3 GDP, % q/q (y/y) Q3	--	-0.6, -5.5	GBP / 08.30
BBA mortgage approvals, k Sep	--	38.1	GBP / 08.30
Industrial orders, % m/m Aug	1.2	2.0, -25.4	EUR / 09.00
Existing home sales, mn Sep	5.40	5.10	USD / 12.30
Fed Chairman Bernanke delivers address at a Boston	--	--	USD / 12.30
Fed Vice Chairman Kohn (FOMC voter) speaks	--	---	USD / 15.30

Currency Tech

AUDUSD
R 2: 0.9475
R 1: 0.9345
CURRENT: 0.9268
S 1: 0.9115
S 2: 0.8985

USDCAD
R 2: 1.0650
R 1: 1.0585
CURRENT: 1.0508
S 1: 1.0380
S 2: 1.0267

EURJPY
S 2: 138.70
S 1: 137.85
CURRENT: 137.69
R 1: 134.75
R 2: 135.21

USDMXN
R 2: 13.178
R 1: 13.089
CURRENT: 12.901
S 1: 12.795
S 2: 12.765

Market Brief

Markets are still digesting the whopper of a US budget deficit released yesterday. The figure has ballooned by close to $1tln over the pat year, staggering for even the US . Currently roughly 51% is held by overseas investors and of that number half is held by Japan and China . Interestingly, while the markets ponder how long foreign appetite for US assets will continue, the Fed happily extends its balance sheet and US government spending rages on. The good news from the US perspective is that by looking at TIC data there seems to be little decay in demand from sovereign names. The GBP continues to outperform, despite yesterday's retail sales coming in much softer than expected at 0.0% on the month and 2.4% annualized (0.5%m/m, 2.8%y/y expected), although last month's print was revised slightly higher. Today’s UK GDP release will be important fo the GBP direction. There has been a shift within the BoE towards solid economic data (like today's GDP) since other indictors such as PMI have been less predictive. Today’s GDP could greatly increase the probability of additional policy easing in November and in our mind GBP selling.

Yesterday's Riksbank Rates were left unchanged at 0.25%, but the accompanying statement struck a distinctly dovish tone with the markets. It reiterated that rates would remain on hold until Autumn 2010, and affirmed that a further SEK100bn would be offered to banks, disappointing those who hoped the financial system may have recovered sufficiently to negate the need for further liquidity injections. The USDSEK rallied sharply to a high of 6.9396 (aided somewhat by a recovery in the USD), but has since pared back gains to 6.8200.

Todays main highlights (aside from the aforementioned UK GDP), will be a slew of European PMI data along with the IFO, whilst the US schedule features Existing Home Sales and speeches from the Fed’s Bernanke and Kohn.

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