Forex Video : Inflation and the SNB

Peter Rosenstreich, chief market analyst at ACM Advanced Currency Markets, talks with Bloomberg's Rishaad Salamat about currencies including the Australian dollar, also discusses the impact of investor risk appetite on the U.S. dollar and the outlook for inflation.

RSS VIDEO FEED

Name: Peter Rosenstreich
Title: Chief Market Analyst
Company: AC Markets
Date: 19/06/09
Time: 07:16 BST
Channel: Bloomberg UK
Duration: 3 mins 20 secs


Interview with Peter Rosenstreich

Rishaad Salamat
Let’s have an update on currency markets and how they’re shaping up, a quick look at what’s
going on out there at the moment. At the moment, Euro: well, there we go, $1.3934, Sterling:
worth $1.6343, and a Dollar buys you JPY96.80, a gain there taking place as far as the
Greenback goes against the Yen. Weakness for the Dollar against Sterling and, indeed, also the
Euro, too. Right, let’s get an expert on these trades. I’m joined from Geneva by Peter
Rosenstreich. He’s a Chief Analyst at Advanced Currency Markets. Peter, thanks very much
indeed for joining us. What’s the main action at the moment? What’s really dictating what’s
going on on these foreign exchanges?

Peter Rosenstreich
Well, for the most part, the market is trying to figure out what the activity of the dollar is going to
be. That’s really driving all FX pricing for the most part. I think there’s an enormous amount of
uncertainty around the economic data coming out of the US. We saw initial claims slightly higher
than expected, yet we saw the Philly Fed number come out much better. The markets have a
very cloudy forecast moving forward in how this economic situation’s going to turn out. That’s
really going to drive the markets. Today, we see a very light economic calendar, and that’ll keep
the FX markets pretty much range-bound for the day.

Rishaad Salamat
Peter, in this segment, the currency report, most people are suggesting that the path of least
resistance for the Dollar is down. Do you agree?

Peter Rosenstreich
I believe so. I think what we’re seeing in the market, especially the risk aversion trade, is getting
less and less of a push. Every time something highly disconcerting comes out or that shakes the
market’s confidence, the Dollar is getting a smaller and smaller boost from that. We think that the
amount of in-flows that they saw during the – the US dollar saw during the credit crisis is going to
look for a higher risk premium outside of the US, and that will equate into a lower Dollar.

Rishaad Salamat
What about the deflation story? Has that gone away, or is it still very much alive?

Peter Rosenstreich
Well, the numbers that we’re seeing I don’t think it’s as a prominent story. We’re still seeing the
questions in, say, Switzerland or the EU more so than in the US. I think the deflation story’s
probably coming off the table, and now the markets are looking more towards the inflation story in
the US, that is. Switzerland, as you know, still has a significant problem with deflation. The SNB
is being very proactive, as we heard yesterday in the Central Bank comment and then with the
subsequent action in the Euro/Swissie. The numbers coming out of Switzerland are expected to
be negative in 2009 and slightly positive inflation numbers in 2010, but there’s still a real concern
about inflation here in Europe and in Switzerland as well.

Rishaad Salamat
Peter, we’ve got 10 seconds. What’s your trade of the day?

Peter Rosenstreich
Trade of the day: you know, we’re looking slightly longer. We’re looking at the commodity
currency, especially in the Aussie Dollar. It’s been holding up very, very well against the Dollar as
well as the Sterling. The proximity to China, the correlation to China’s growth which keeps on
getting upgraded, the recovery story globally, we think it’s a very strong trade in the mid-term.

Rishaad Salamat
Peter, thanks a lot for that. Have a great weekend. Peter Rosenstreich there; he’s a Chief
Economist [sic] at Advanced Currency Markets.