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Today’s Comment

Majors & Scandies

Risk aversion weighed heavily on the Asian stock markets following slides in the major US stock indices. It was the financial shares in particular that took the hardest blow, as funding concerns kicked in once again after a Lehman Brothers research report said that a pending accounting change could force Fannie Mae and Freddie Mac (the two largest mortgage lenders in the US) to raise a total of 75 billion USD in capital.

In the FX markets the JPY strengthened somewhat thus causing EURJPY to recede from recent highs. However for the time being we the technical case isn’t quite in place for a selling recommendation on the currency cross. Thus we prefer to maintain a neutral stance for the time being.

Yesterday the SEK weakened after having strengthened quite dramatically following the surprisingly hawkish statement made by Riksbanken after the monetary policy meeting on Thursday. Thus it seems like investors are awaiting macro economic data that shows whether the hawkish stance can indeed be justified or not. Hence the CPI data which is due for release on Thursday morning will be crucial for the short term trend in EURSEK. At this point we don’t believe that inflation in Sweden has peaked as food- and energy prices keep rising. Thus we also believe that short term risks on SEK are on the upside following the CPI data. For now however technical indicators suggest that there is a bit further to go on the upside on EURSEK (resistance around 942.50 - 943.00). Thus we prefer to maintain a neutral stance for the time being but will consider going short on the currency cross on a further correction higher towards the 943.00- area. More on this subject later.

Emerging Markets

Yesterday the markets were still celebrating that Thursdays ECB rate hike seems like being a ‘one off event’. And it is now likely ECB will stay unchanged at 4.25 % for the rest of 2008. However the party stopped when the US market opened and during the US trading session the local currencies lost what was gained during the European session. In general EM currencies have still performed well since the ECB meeting. As an example TRY has gained 3.4 % since the ECB meeting Thursday.

We will not get carried away by the gains we have seen since Thursday. We therefore maintain a defensive view on the emerging markets and stay neutral in most of our currencies. However we have two important changes today:

1) We almost reached our target in PLN yesterday. We move our take profit in EURPLN to 3.25 (PLNDKK 229.45) and have a tight stop profit at 3.32 (PLNDKK 224.61). Background: We think Poland will continue to perform in nervous markets.

2) In EURISK we open a new position. We buy EURISK at 119.2160 (selling ISKDKK at 6.26). We take profit at 126.00 and stop loss at 116.00 (take profit placed at 5.92 and stop loss at 6.43 in ISKDKK). Background: ISK has done very well lately - it is time for a correction.

Today’s key events

• 09:00 Consumer prices (CZK)
• 09:00 Unemployment (CZK)
• 09:00 Industrial production (TRY)
• 14:00 Fed’s Bernanke speaks (USD)
• 16:00 Pending home sales (USD)
• 18:30 Fed’s Lacker speaks on economic outlook (USD)
• 21:00 Consumer credit (USD)

Jyske Core Positions - Recommendations

Jyske Markets - FX Research
http://www.jyskebank.dk/finansnyt

The analysis is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor for transactions made on the basis of the information or the estimates of the analysis. The estimates and recommendation of the analysis may be changed without notice. The analysis is for personal use of Jyske Bank’s customers and may not be copied.