reports
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/The end of the line for sterling
USD: Payrolls to support the greenback. The ISM reports this week provided contrasting signals about the US economy: the manufacturing sector is now hovering around recession-like levels, but the non-manufacturing gauge sent positive signals. The net impact has, however, been a still aggressive pricing for Fed monetary easing by the markets - 115bp of cuts in the price by end-2020 – and a weaker dollar. Today's release of the unemployment report may however defy part of the dovish expectation...
- Petr Krpata
- CFA
Watch: The pound has further to fall amid the Brexit chaos
Given the ongoing political stalemate in the UK over Brexit, we see yet more downside risks to the pound and look for EUR/GBP to converge to 0.95 in one to three months and GBP/USD to fall to 1.17. ING's Petr Krpata explains what's going on and why more risk premium can be built into sterling
- James Smith
- Petr Krpata
- CFA
Brexit: Four thoughts after Westminster's wild Wednesday
A UK election now looks inevitable - the only question now is 'when'. However, the chances of a 'no deal' Brexit on 31 October appear to have receded, but there are still ways it could happen, and given the outcome of an election looks deeply uncertain, despite the Conservatives' lead in the polls, the rebound in sterling is unlikely to have legs
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/GBP rebound won't have legs
USD: Modest downside risk but market pricing for aggressive Fed easing . Following the disappointing US ISM Manufacturing, we see a modest downside risk to ISM Non-manufacturing today. Any downside surprise today is likely to be USD negative as it will help to justify the current market expectations for Fed's easing (albeit this now looks rather aggressive). Still, unless we see a more meaningful deterioration in the US consumer sector (which have so far been more immune to the trade conflict vs...
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/GBP: Few reasons to be cheerful
While GBP has been rebounding after the UK Parliament's first successful step towards legislating against no deal Brexit yesterday, we note that the (likely) resulting early elections (the motion for this is likely to be submitted today) doesn't bode well for the pound – bar a possible short term reprieve. Not only uncertainty about the election outcome (thus various possible Brexit options) remains high, but the most probable alternatives don't appear to offer much of a respite for GBP. This ...
- Petr Krpata
- CFA
FX: Sterling risk premium tracker
With Brexit uncertainty rising, we introduce a sterling risk premium tracker. We look at various measures of sterling stress, gauged by factors such as our short-term financial fair value model, speculative positioning or the options market. We think the risk of no-deal Brexit / early election is underpriced by the market and look for more downside to GBP
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/A fateful day for Brexit and sterling
In a recent publication, we identified two routes for the UK Parliament to stop a no-deal Brexit: a no-confidence vote and a legislative path. Today, Parliament will have its best chance to walk the second route through an attempt to gain control of the House of Commons agenda. This would allow it to table legislation to try to force the PM back to Brussels to ask for another Article 50 extension, although success today will rely heavily on an unprecedented ruling by Speaker John Bercow. If this...
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/EUR: ‘Dropping like crazy'
EUR/$ fell through 1.10 on Friday, prompting President Trump to describe the euro as ‘dropping like crazy'. His focus, however, is still on the need for massive easing from the Fed, rather than the suggestion of FX intervention to weaken the dollar. Given a very weak Eurozone growth outlook, Brexit event risk reaching a crescendo and Italy seemingly priced to perfection (despite a very fragile political scene), it's hard to see the EUR/$ trend turning soon. 1.0820/40 looks the bias this week â...
- Peter Virovacz
- Petr Krpata
- CFA
Monitoring Hungary/NBH looking through the weak HUF
GDP growth was stronger than expected, with a mild slowdown but still posting the best rate in the European Union. Strong domestic factors should keep Hungary on top, but a cloudy external outlook will take its toll. EUR/HUF reached a new all-time high, with the NBH unlikely to react as FX weakness is externally driven.
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/USD enjoying the roller-coaster ride on trade
Trade-related sentiment continues to be on a roller-coaster, with the dollar (DXY is up 1% since last Friday) seemingly the only one enjoying the ride. Latest news hinted once again at easing tensions after the Chinese government indicated that there will be no immediate retaliation to the recent escalation. Nonetheless, a solution still appears quite far and lingering fears of a global slowdown have been weighing on the ultra-sensitive AUD and NZD overnight, prompting some safe-haven inflows an...
- James Smith
- Petr Krpata
- CFA
Swedish krona: Less bad, but bad nonetheless
Despite some tentative improvement in domestic drivers (no longer ultra-dovish Riksbank, stabilising current account), the outlook for the Swedish krona remains poor for the rest of the year. We stick to our EUR/SEK 11.00 forecast as trade war uncertainty and poor SEK relative characteristics weigh on the currency
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/GBP: More weakness to come
GBP is back under pressure following PM Johnson's decision to suspend parliament. This clearly underscores the uncertainty and the ample downside risk the pound faces over the coming weeks. As per Brexit and the pound after parliament suspended, we look for GBP weakness to build into the mid-October EU summit, given a deal still seems unlikely and the uncertainty about a hard Brexit will increase. This is when we expect EUR/GBP to re-test the multi-year high of 0.9325 reached earlier this month....
- Peter Virovacz
- Petr Krpata
- CFA
HUF: No issue with weak forint
EUR/HUF at 330 is no game changer for the NBH and no longer a line in the sand for the central bank. This is because the current HUF weakness is primarily externally driven rather than caused by the NBH credibility issue (as opposed to the summer 2018 and 2Q19 sell-offs). Given the high inflation, the weaker nominal exchange rate (as long as it is weakening in an orderly way) should be welcomed. EUR/HUF is set to breach the all-time high of 330.75 in coming weeks but not to underperform its CEE ...
- James Smith
- Petr Krpata
- CFA
Brexit and the pound after parliament suspended
The UK government's decision to suspend parliament means the Brexit process is likely to go down to the wire. 'No deal' has become more likely, although we still narrowly think a no-confidence vote, which leads to an Article 50 extension and early elections, remains the most probable scenario
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/It's the wrong time for carry
It seems quite strange that most global equity markets have had a good year – even as trade uncertainties have grown and inverted yield curves increasingly point towards stalling/recessionary levels of growth. Typically, however, equity markets are one of the last asset classes to turn in the cycle and this shoe may drop later this year if corporate earnings guidance and profits re-align with expectations of activity. Lower equities typically coincide with higher levels of volatility, underm...
- Peter Virovacz
- Petr Krpata
- CFA
NBH Review/Emphasising downside risks
The Hungarian central bank left the interest rate corridor and the base rate as it is. The key messages remained the same, but the NBH emphasised several times, that downside risks have strengthened. Now we have to wait for the big guys to move in September and till we join, the NBH will stay on the side-lines.
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/EUR: Limited benefits from Italy's new majority
The Democratic Party (PD) and the Five Star Movement are very close to agreeing on a coalition pact to form a new majority in Italy. Media reports suggest that the government should be led by previous PM Conte, while the PD could secure some key roles in the cabinet. There are still a few points to clarify around the new government's programme and some caution may be warranted given the risk of a last-minute turnaround by either of the two parties. On a market perspective, the new coalition is l...
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/What can Powell do to weaken the dollar?
USD: Jackson Hole may be yet another disappointment for doves - As the Jackson Hole Symposium kicks off, the US OIS curve shows that almost three 25bp rate cuts are now fully priced in by 1Q20, with one more expected by end-2020. Markets have recently cemented their dovish views without any clear indication from the Fed that it may be leaning in favour of more aggressive easing. All this suggests a key preliminary consideration ahead of today's speech by Chair Powell (at 1500 BST): matching mark...
- Peter Virovacz
- Petr Krpata
- CFA
NBH Preview/Intact wait-and-see policy
External and domestic developments support the current NBH wait-and-see policy. In fact, the bias may be even for a more cautious NBH stance. In relative terms, HUF benefits from stretched short positioning and should continue to outperform PLN. Following the rally in HUF rates, we now stay on the side-lines.
- Chris Turner
- Francesco Pesole
- Petr Krpata
- CFA
Daily FX Strategy/USD: Even greater focus on Jackson Hole
The July FOMC Minutes reiterated Chair Powell's message from the July meeting; that is an insurance rate cut and no hints at the start of a pronounced easing cycle (although the FOMC was divided with some members looking for 50bp cuts and some for no cuts). While clearly disappointing those hoping for a dovish tilt and translating into weaker cyclical currencies, its effect should be temporary as the price action next week will be largely determined by Chair Powell's speech in Jackson Hole tomor...
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