Posts tagged ‘ubs’

February 13, 2012

US strength should benefit the greenback medium term


US fundamentals keep outpacing its major rivals as shown by the last performance of the main economic indicators in the last weeks. The greenback, measured by the US Dollar Index, has posted its biggest daily advance since January 13 on last Friday, as Greek woes were weighting on sentiment.

In the view of M.Mohi-uddin, Managing Director of Foreign Exchange Strategy at UBS, the Fed’s “exceptionally low” interest rate stance could tumble if the improvement in the US economic activity accelerates, prompting the markets to start pricing in the likelihood of a hike in the cash rates before late 2014.

The analyst comments that UBS expects this week’s data to remain solid and suggests investors to scrutinize the US fixed income market, as a raise in the 10-yr benchmark could derive in a reaction of USD-based crosses, particularly USD/JPY.

February 13, 2012

EUR/USD could see 1.15 year-end

The rally in the single currency sparked in mid January seems to be in a wait-and-see mode since early February. The Greek front – parliamentary vote on Sunday on the extra austerity measures, PSI talks, bailout package, domestic unrests – has been, and it is, the main driver in the evolution of the FX markets as of late, and this week appears to be the “make-or-break” one regarding the relation between the bloc currency and Greece.
by UBS

The euro-group finance ministers meeting on February 15 has been pointed to be the deadline as the “troika” could decide whether to release the next tranche of the bailout package, vital to honour the debt rollover expiring on March 20.

M.Mohi-uddin, Managing Director of Foreign Exchange Strategy at UBS, remarks that a positive outcome from Greece will be supportive of the shared currency, at least until the second LTRO, due on February 29. So, what lies beyond the end of February? The expert remains conservative on the euro, as the ECB has hinted the likelihood of further rate cuts if the economic conditions in the bloc worsen, spilling their effects over the prices.

Reinforcing the above, members of the euro zone already embarked in more austerity measures could see their economic growth undermined in the upcoming quarters and also political risks are looming with Greece and France holding elections in the next months.

All in all, a not-so-cheerful panorama is lying ahead for the euro. “As a result we continue to see the euro ending the year at 1.15 against the dollar”, the analyst stressed.

February 13, 2012

RBA only temporarily on hold, fade AUDUSD rally


The AUDUSD at 1.07-1.08 looks overdone, says Mansoor Mohi-uddin, Head of Foreign Exchange Strategy at UBS Macro Research, who thinks along the UBS Economics experts lines that at least one more rate cut by the RBA will be seen.

UBS makes this call based on “next week’s January payrolls data likely to show Australia’s unemployment rate ticking up to 5.3%, the latest Chinese data showing higher than expected inflation but lower than expected bank loans growth and the Australian dollar still remaining at high historic levels. This risk is compounded by Australian banks this week announcing they were raising their mortgage rates to consumers.”

As a result of UBS concerns about the overvaluation of the currency, the bank issued a recommendation to buy a three month AUD put/USD call option with a strike at 1.03, expiring 4 May 2012 New York cut. The cost was 1.56% of face value and the spot reference price for AUDUSD at the time was 1.0725.”

February 7, 2012



While most of the focus remains on Greece, the SNB Chief gave a speech during the European morning where he voiced his commitment to defend the 1.20 floor in the EUR/CHF: “He said the SNB is firmly committed to the 1.20 EURCHF floor, can buy unlimited quantities of foreign currency and will take additional steps if warranted”, wrote Chris Walker, analyst at UBS AG.

Ahead of the speech, the EUR/CHF rallied and found a high at 1.2084. Although a strong retracement followed, the pair is now back on those highs, quoting at 1.2082 at the moment of writing.

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