PDF Archive

Easily share your PDF documents with your contacts, on the Web and Social Networks.

Send a file File manager PDF Toolbox Search Help Contact



UBS7 .pdf



Original filename: UBS7.pdf
Author: svc_erd_prd_rpp

This PDF 1.4 document has been generated by / PDF Editor 2.2 - Foxit Corporation, and has been sent on pdf-archive.com on 13/11/2013 at 11:11, from IP address 212.23.x.x. The current document download page has been viewed 605 times.
File size: 104 KB (3 pages).
Privacy: public file




Download original PDF file









Document preview


ab

Fixed Income & FX Research
FX - Strategy

UBS Investment Research
FX Morning Adviser

Global

Positioning For QIF
13 November 2013

For sterling, it appears that Wednesday’s inflation report could only offer surprises
to the upside. The ongoing data surge is becoming rather difficult to ignore and any
minor hints at an adjustment to forward guidance would be enough to encourage
the currency to rebound. Even if the BoE stands still, given the broader direction
most other central banks are headed, GBP will likely remain resilient in the shortterm. The exception of course remains GBPUSD, where the market appears to be
moving, albeit grudgingly, towards an early Q1 Fed taper. As such, we remain
wary of playing GBP strength or any ‘BoE corrections’ on this leg. EURGBP will
continue to shoulder the burden of adjustment, and as the cross comprises the bulk
of the currency’s NEER basket the BoE will unlikely object.

www.ubs.com/fx

When seeking immediate catalysts the market must be willing to look a bit further
up the OIS curve – where sensitivity to BoE change is the greatest. Our economists
look for an interest rate hike in H2 2015, but despite the robust numbers, forward
SONIA is only half-heartedly pricing in this scenario, indicating that the BoE’s
current guidance is still having some effect. Merely three months after its original
launch, expecting a shift (via labour market projections) so soon is a stretch.
However, as we have highlighted post-ECB, in the current environment where very
small changes in currencies’ OIS spreads can lead to wide ranges in currency pair
performance, merely a statement of risks will be enough. If anything, GBP’s gains
against the EUR so far has been significantly under-pricing the ongoing divergence
between SONIA and EONIA (Chart 1). As the most recent shift has largely been
driven by the ECB’s decisions and rising disinflationary pressures, the
transmission to sterling has been more subdued. As a growth/high(er)-beta
currency, carry is needed and expectations will be on the BoE to deliver. Even if
the MPC shows reluctance, the current EUR-GBP rate divergence will be enough
to set a ceiling above EURGBP and data performance will take care of the rest.
What’s even more striking about EURGBP is that institutional positioning in shorts
is actually much lighter than the policy divergence would suggest. There was a
sharp against sterling in Q2 amid growth fears, but the remarkable turnaround in
both data and the Eurozone’s own fortunes since July as led to a positioning
recovery for sterling against both GBP and EUR (Chart 2). However, institutional
(hedge funds and real money) positioning in GBP vs. both EUR and USD are both
below 2013 highs. The hesitation may reflect misgivings about the fundamentals
and sustainability of the UK’s economic recovery, while GBPUSD also has the
evolving Fed view to contend with. These concerns are valid, and given our view
on the primacy of policy divergence, again the burden of adjustment will fall on
EURGBP: crucially, there is ample room for an extension in shorts in the cross.
Chart 1: BoE Guidance still somewhat effective

Chart 2: Institutional buying of GBP not aggressive yet
6.00

45

1.24
GBPEUR

40

Forward Sonia-Eonia Spread (v 2y)

1.22

4.00

35
2.00

30
25
20

1.18

15
10

1.16

Long GBP

$bn

1.20

0.00

-2.00
Cumulative positioning
since Jan 2013

-4.00

5
1.14
Jan-13

0
Apr-13

Jun-13

Sep-13

Sources: Bloomberg, UBS Calculations

This report has been prepared by UBS Limited

GBPUSD
-6.00
Jan-13

Apr-13

Sources: Bloomberg, UBS Calculations

Jul-13

GBPEUR
Oct-13

FX Morning Adviser 13 November 2013

FX Technicals
EURUSD

NEUTRAL

The recent weakness found support at 1.3293 and the pair has been
consolidating over the past few sessions. Any further recovery will find strong
resistance at 1.3501.

USDJPY

BULLISH

Resistance is at 100.61, a break above which would open 101.53. Support is at
98.71 ahead of 97.62.

GBPUSD

NEUTRAL

Further selling pressure on Wednesday saw the pair stall just shy of the support
at 1.5845. A break below this would expose the significant support at 1.5708.
Resistance is at 1.5986 ahead of 1.6118.

USDCHF

NEUTRAL

Critical resistance is at 0.9253. A break through this would open 0.9365. Support
is at 0.9152 ahead of 0.9113.

AUDUSD

BEARISH

The bearish development on Wednesday was the close below the support at
0.9303. This suggests scope for more downside to next support at 0.9196 and
then 0.8848. Resistance is at 0.9406.

USDCAD

BULLISH

With the MACD above its zero line, this is a bullish condition; there’s scope for
extension of the strength. Resistance is at 1.0509 ahead of the critical 1.0568.
Support is at 1.0446 ahead of 1.0398.

EURCHF

NEUTRAL

Resistance is at 1.2338 ahead of 1. 2376. Support is at 1.2277 ahead of 1.2215.

EURGBP

NEUTRAL

The cross extended its recovery and is approaching resistance at 0.8477. A
break through this level would indicate more strength to 0.8585. Support is at
0.8377 ahead of 0.8301.

EURJPY

BULLISH

The strength over the past few sessions was staged from the support at 131.15.
With trending and momentum indicators pointing higher, there’s potential for test
of the major resistance is at 135.51.

*NOTE: The trend for each currency pair as defined in the table is determined by our proprietary model and is independent of our discretionary interpretation
of price action
Source: UBS FX Strategy

Key Events
Country

New Zealand
Australia
Australia
Japan
Japan
Japan
Japan
Australia
Australia
Japan
UK
UK
UK
UK
UK
Euro Area
Euro Area
UK
United States
Euro Area
United States
Canada
Canada
Sweden
Euro Area
United States
New Zealand
New Zealand

GMT

23:00
23:30
23:30
23:50
23:50
23:50
23:50
00:30
00:30
01:30
09:30
09:30
09:30
09:30
09:30
10:00
10:00
10:30
12:00
12:10
13:45
14:00
14:00
17:00
18:00
19:00
21:30
21:45

Release/Event

RBNZ's Wheeler Speaks
Westpac Consumer Confidence sa (Nov)
Westpac Cons. Confidence Index (Nov)
Machine Orders (Sep)
Machine Orders (Sep)
Domestic CGPI (Oct)
Domestic CGPI (Oct)
Wage Cost Index (Q3)
Wage Cost Index (Q3)
BoJ's Miyao Speaks
Claimant Count Rate (Oct)
Jobless Claims Change (Oct)
Average Weekly Earnings (Sep)
Weekly Earnings ex Bonus (Sep)
ILO Unemployment Rate (Sep)
Industrial Production sa (Sep)
Industrial Production wda (Sep)
BoE Inflation Report
MBA Mortgage Applications (Nov-8)
ECB's Weidmann Speaks
Fed's Pianalto Speaks
Teranet/National Bank HPI (Oct)
Teranet/National Bank HPI (Oct)
Riksbank's Ingves Speaks
ECB's Linde Speaks
Monthly Budget Statement (Oct)
Manufacturing PMI (Oct)
Retail Sales Ex Inflation (Q3)

Frequency

UBS

Prev/Revised

Consensus

Actual

m-o-m
index
m-o-m
y-o-y
m-o-m
y-o-y
q-o-q
y-o-y

n/a
n/a
-2.40%
12.70%
n/a
n/a
0.70%
2.90%

-2.10%
108.3
5.40%
10.30%
0.30%
2.30%
0.70%
2.90%

n/a
n/a
-1.80%
12.50%
-0.20%
2.50%
0.70%
2.90%

1.90%
110.3
-2.10%
11.40%
-0.10%
2.50%
0.50%
2.70%

m-o-m
lvl
3m/y-o-y
3m/y-o-y
3mths
m-o-m
y-o-y

4.00%
-40.0K
0.80%
1.00%
7.70%
n/a
n/a

4.00%
-41.7K
0.70%
0.80%
7.70%
1.00%
-2.10%

3.90%
-30.0K
0.70%
0.90%
7.60%
-0.30%
0.00%

m-o-m

n/a

-7.00%

n/a

m-o-m
y-o-y

n/a
n/a

0.00%
2.70%

n/a
n/a

USD bn
index
q-o-q

n/a
n/a
1.00%

-120
54.3
1.70%

-104
n/a
0.90%
UBS 2

FX Morning Adviser 13 November 2013

Norway

Norges Bank's Qvigstad Speaks

Source: UBS Global Economics, Bloomberg LP, Reuters LP, Reuters, Market News International

UBS 3


UBS7.pdf - page 1/3
UBS7.pdf - page 2/3
UBS7.pdf - page 3/3

Related documents


PDF Document ubs7
PDF Document fx daily118
PDF Document fx daily112
PDF Document forex trading statistics v 1
PDF Document fx daily3
PDF Document fx daily160


Related keywords