Next week the dollar could receive some support from the FOMC….…
For professional investors and advisers only
euro, such as the ZEW index, which rose as opposed to expectations for a decline, and the nonnegative outcome of the “feared” Spanish auctions. However, in our view the most supportive
factor for the single currency was the increasingly large size of short euro positioning trades on the speculative market the previous week. Therefore, the situation may be reversed. Next week, flash PMI data will be released. If disappointing, a correction towards/below 1.3000 would be rather likely, unless the outcome of the G-20 and of the French elections prove to be especially positive. If on the other hand economic data releases surprise on the upside, the euro could breach the resistance at 1.3230 and press on towards 1.3300 – although up to that level the possibility of a broader and more decisive correction within the following week would not be compromised, in the run up to the next ECB meeting (3 May) and to the elections in Greece (6
May).
(although this could be a temporary development), retail sales comfortably beat expectations, and the BoE minutes sent off some hawkish signals. Indeed, the minority that voted for a further expansion of the APF last month has halved: Posen joined the ranks of the majority and Miles was left alone requesting additional quantitative stimulus. The BoE is revising short-term inflation upwards, and fears this may have negative repercussion on medium-term prospects, although it has opted not to express its view on this until the May Inflation Report (16 May). The largest risk in the eyes of the central bank still seems to be the situation in the euro area, which is hard to forecast; therefore, next month’s meeting (10 May) will be rather challenging. In the meantime, next week (Wednesday) the first estimate of Q1 GDP is due for release, and should show a recovery (albeit weak) to +0.1% q/q, from -0.3% q/q in Q4. Disappointing data would result in a correction of sterling to back below GBP/USD 1,6000 and above EUR/GBP 0.8200.
Appendix
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Valuation Methodology
Trading Ideas are based on the market’s expectations, investors’ positioning and technical, quantitative or qualitative aspects. They take into account the key macro and market events and to what extent they have already been discounted in yields and/or market spreads. They are also based on events which are expected to affect the market trend in terms of yields and/or spreads in the short-medium term. The Trading Ideas may refer to both cash and derivative instruments and indicate a precise target or yield range or a yield spread between different market curves or different maturities on the same curve. The relative valuations may be in terms of yield, asset swap spreads or benchmark spreads.
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Intesa Sanpaolo S.p.A. trading ideas are made in both a very short time horizon (the current day or subsequent days) or in a horizon ranging from one week to three months, in conjunction with any exceptional event that affects the issuer’s operations. In the case of a short note, we advise investors to refer to the most recent report published by Intesa Sanpaolo S.p.A’s Research Department for a full analysis of valuation methodology, earnings assumptions and risks. Research is available on IMI’s web site (www.bancaimi.com) or by contacting your sales representative.
Source: BONDWorld – Intesa Sanpaolo – Research Department
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