Danske Bank

FX Daily

Majors: EUR/USD remains largely unfazed by the rally in risk sentiment elsewhere(e.g. Danish equities). That is quite the feat given a part of the rally in risk is also a small fade in interest rates and commodity prices like Brent, which were part of the reason for taking EUR/USD lower. In our view, the risk continues to remain to the downside in EUR/USD and we would expect a bounce to remain shallow and recommend to sell in to such; e.g. in to the 1.161.1650 area. We target 1.10 in12M.The rally in USD/JPY stalled yesterday around the 113.5 level where 10Y US Treasury yield and oil prices reversed lower. However, we do not think this will be the end of the rise in USD/JPY and see the cross moving to 114 in 1M, 115 in 3M and further 116 in 6 12M.

Tactical FX Views

EUR/USD - we expect the data to support expectations of Fed tapering, for cyclical indicators to calm further and for the USD to strengthen on the back of this over the coming quarters.EUR/NOK - we recommend to buy 3M bullish seagull as Norges Bank and natural gas price induced strength will prove temporary. EUR/SEK - supported by the USD and flagging macro momentum, eyeing Swedish inflation data, and remains a buy on dips EUR/GBP - caught between monetary policy divergence and stagflation risks in both Europe and the USD/JPY - elevated commodity prices will continue to weigh on the JPY and we expect the cross to move higher as US yields begin to rise. EUR/DKK - range bound after rate cut induced bounce. Oil - stronger USD, OPEC+ response to ease upwards pressure on prices eventually.


European Open

USD held flat on the Asian morning, which was marked more-so by EM developments. Highlights of the day were KRW,which dipped 0.54% after Finance Minister Hong mentioned potential stabilisation steps taken in the currency. THB saw a0.74% gain on the back of inflows into equity, while TRY dipped by 0.7% to record lows after President Erdogan fired 3members of the MPC who were against his call to cut interest rates. On the data front, SGD saw its key currency slope unexpectedly raised “slightly” from 0% prior, which saw the pair dipping slightly. China CPI came in slightly under expectations, printing 0.7% YoY for September, while AUD jobs report saw mixed data, with employment change coming in at -138k (vs -110k consensus) while unemployment rate came in at 4.6% (vs 4.8% consensus).

Neither currency saw much of a movement on the back of the data release. Looking ahead, we flag a number of events to eye in the US. We will see Jobless Claims & PPI (13:30 BST), while Fedspeak kicks off with Bostic (15:00 BST), Logan (17:00 BST), Barkin (18:00 BST) and Harker (23:00 BST).SEK sights CPI (08:30 BST), while we also note Riksbank Deputy Governor Skingsley speaking (12:15 BST), although headline risk for the latter is minimal since the talk is about digital currency. GBP has BOE's Tenreyro (11:10 BST) and Catherine Mann(15:40 BST). Expect comments to sound slightly on the dovish side. On the EM front, PLN sees CA balance (13:00 BST),MXN sees Central Bank Monetary Policy Minutes (15:00 BST), and ARS sees CPI (22:00 BST).