FX Fundamental Analysis
did not at some future point test the resolve of the Swiss National Bank and see if the promise to buy ‘any amount’ of foreign currency holds true, although perhaps not until the European sovereign issue resolutions are more clearly visible, so we shan’t hold our breath on the timing.
In fact as we go to print, we learn of rumours that Greek Prime Minister George Papandreou is succumbing to internal governmental pressure and may now consider a referendum on whether Greece should continue to tackle its debt crisis within the EuroZone or by
exiting the single currency. Papandreou likely
hopes that this would constitute a fresh mandate for his Socialist government to continue with an austerity drive backed by the ‘Troika’, see FX Trader Magazine July-Sep edition for our explanation of why it may make sense for Greece to exit the Euro on an exchange- rate basis, the GRD is still way too strong even on current conversion rates.
With everything discussed so far, it’s no real surprise that risk appetite amongst currency buyers of AUD, BRL and NZD has ebbed lately, although in Australia the RBA just announced that despite being well placed to respond to global
economic conditions and noting consumer cautiousness, market pricing for large rate cuts ‘might not be accurate.’ This may be good for a short squeeze as the currency bears take some pain but it surely still makes sense to sell any decent Aussie rally until the uncertain global outlook lifts, not least because the Australian economic ‘wagon’ seems very much hitched to China right now and, as evidenced by Chinese equity market weakness, the FXI hit a new low for the year on Sep 19th, begging the question of how much bigger the Chinese economic miracle can grow in the near future. From the above and looking from a trading standpoint, one clear
Perhaps the BoJ will be inspired to take a leaf from the SNB’s handbook of intervention techniques as a possible Q4 FX market surprise?
12 FX TRADER MAGAZINE October - December 2011
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