Focus FX
 |
23 Februarie 2010 |
 |
RAIFFEISEN BANK S.A. |
Adresa
Piaţa Charles de Gaulle, Nr. 15
011857 Bucureşti, Sector 1
Telefon
+40-21-306.10.00
+40-21-306.15.54
Fax
+40-21-230.07.00
Website
www.raiffeisen.ro
EUR/CHF:1.468-1.35 (March)
In the last few days the EUR/CHF has scraped along the 1.464 mark. This has been the new pain threshold for the SNB since December, and the Bank has already directly intervened several times on the currency market at this level. However, these moves have involved smaller volumes when compared to 2009. The resultant spikes in the exchange rate were therefore short-lived and fell flat again after a few hours. This cautious and hesitant approach could be taken as a sign that the SNB no longer wants to actively weaken the franc. The SNB is most likely playing a game of wait-and-see. The interventions on the currency market have been scaled back, but not yet abolished, just in case economic activity starts to dip again. Yet since we believe the economic climate will continue to brighten up, we reckon the SNB will fully distance itself from currency market interventions at its meeting in March, but at the latest in June. This should then pave the way for the EUR/CHF to shift downward (=stronger franc), a currency pair that in recent weeks has been pretty much unaffected by interest rate movements and risk sentiment. If economic trends and activity remain robust in Switzerland in Q2 and Q3, rate hikes could well become an issue rather soon for the SNB. Consequently, we are to revise our forecasts (especially for June to December).
Trading Ideas
Note: This list contains only the strongest trading ideas for the markets that we cover. Therefore not every market forecast that implies a buy recommendation is also listed as a trading idea! Trading ideas may also differ from our quarterly forecasts. as the time horizon can be different. The time horizon of the trade is at least two weeks. But not more than 3 months.
EUR/USD:1.367-1.35 (March)
At EUR/USD 1.367 the euro is trading at essentially the same level to the dollar as last Tuesday. However, during the week we did witness sharp movements in both directions. Around the middle of last week the single European currency climbed up to just short of EUR/USD 1.38, driven seemingly by no real reason at all, but it could not sustain itself at this lofty level. The surprising decision on Friday by the US Federal Reserve to raise its discount rate by 0.25% to 0.75% caused some turbulence on the currency markets fora while. Many market participants construed this step to be the first harbinger of possible interest rate hikes in the USA. The dollar made some broadlybased gains. Against the euro the greenback moved to EUR/USD 1.345. Yet the Fed quickly made it perfectly clear that the increase in the discount rateshould not be used to draw any conclusions about the future development of the fed funds rate. As recently announced, the latter is set to stay at just over 0% for some time to come. This helped the euro to recover somewhat, but in the coming weeks we believe it will come under more pressure. Although our estimate of key interest trends in the USA has not changed in view of the unexpected raise in the discount interest rate, and we still do not anticipate seeing the firstrate hike before the last quarter of 2010, the striking divergence in the economic recovery between the USA and the euro area certainly does favour the dollar just now. What is more, temporary factors on the US labour market – i.e. the upcoming census – will exert a benign influence until May. Once economic activity visibly starts to slow down in the USA in the summer, and the one-off effects on the labour market begin to unravel, the euro should recover again andclimb back well above EUR/USD 1.40.
