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11 Jun 2013
Flash: European morning session recap – TD Securties
FXstreet.com (London) - TD Securities offered a brief re-cap on the European morning session that has been so far dominated by news of FX intervention by global EM central banks.
Currencies weakening on continued risk of QE tapering
They explain that currency weakness starts becoming endemic in a continued bearish reaction to the Fed QE tapering risks. The teams said in an attempt to backstop the BRL slide, for example, Brazil’s BCB announced yesterday the sale of FX swap contracts for a second day in a week. They explained that the USD/BRL stabilized but did not invert the trend, and momentum remains negative. They mention that Poland did something similar on Friday, while today the big event was Turkey’s CBRT resuming low TRY funding conditions and direct FX sales to prop up the lira (see Turkey comment for further details).
Central Banks interventions
Also today, they said India announced measures to boost FDI, while the RBI intervened in the FX market. Finally, Indonesia’s authorities (both the government and BI) said they will coordinate to keep USD/IDR capped at 9,800. Easing dollar funding conditions in the onshore market would help achieve this target, but the Bank is often making mistakes during periods of heightened aversion to local assets that translate into capital outflows.
EUR/USD higher
In Europe, TD Securities research teams said spreads have also widened much faster than expected in the smallest peripherals, which shows that the reassessment of the US rates outlook is becoming a real global theme and not just affecting high yielding EM bonds and FX and in line with what seems to also be a global reassessment of liquidity provision. They said against this backdrop, EUR/USD keeps nudging higher (the pair is trading at 1.3274 at the time of writing), but crude oil and commodities do not trade in line with an economic recovery scenario globally. For the rest of the day, they say, it only worth keeping an eye on the German Constitutional Court that has begun hearing the first of two days of testimony on the legality of the ESM and the ECB’s OMT
Currencies weakening on continued risk of QE tapering
They explain that currency weakness starts becoming endemic in a continued bearish reaction to the Fed QE tapering risks. The teams said in an attempt to backstop the BRL slide, for example, Brazil’s BCB announced yesterday the sale of FX swap contracts for a second day in a week. They explained that the USD/BRL stabilized but did not invert the trend, and momentum remains negative. They mention that Poland did something similar on Friday, while today the big event was Turkey’s CBRT resuming low TRY funding conditions and direct FX sales to prop up the lira (see Turkey comment for further details).
Central Banks interventions
Also today, they said India announced measures to boost FDI, while the RBI intervened in the FX market. Finally, Indonesia’s authorities (both the government and BI) said they will coordinate to keep USD/IDR capped at 9,800. Easing dollar funding conditions in the onshore market would help achieve this target, but the Bank is often making mistakes during periods of heightened aversion to local assets that translate into capital outflows.
EUR/USD higher
In Europe, TD Securities research teams said spreads have also widened much faster than expected in the smallest peripherals, which shows that the reassessment of the US rates outlook is becoming a real global theme and not just affecting high yielding EM bonds and FX and in line with what seems to also be a global reassessment of liquidity provision. They said against this backdrop, EUR/USD keeps nudging higher (the pair is trading at 1.3274 at the time of writing), but crude oil and commodities do not trade in line with an economic recovery scenario globally. For the rest of the day, they say, it only worth keeping an eye on the German Constitutional Court that has begun hearing the first of two days of testimony on the legality of the ESM and the ECB’s OMT