Forex Flash: Commodity currency strength may be at the end – JP Morgan
FXstreet.com (Barcelona) - The only flattering thing to say about China is that Brazil and India are disappointing even more, but it doesn't change the fact that consensus for China growth has been declining continuously for 18 months, from 8.4% to 7.7% for 2012. Indian and Brazilian growth forecasts dropped from 7% to 5.9%, and from 2.9% to 1.9%, respectively.
JP Morgan analysts consider normal to see "firmer FX in countries where the growth consensus has been stable-to-higher (EUR, AUD, NZD, MXN, RUB, PHP) and lower FX where growth has undershot expectations (CNY, BRL)", said analyst John Normand, pointing that every 1% change in Chinese real GDP growthdrives a 4%-5% change in commodity currencies, which would explain the AUDUSD and NZDUSD ranges and the risk of an extension soon if the key China Q3 GDP points to further slowdown. Data is due on October 18th: "The window for commodity currency strength may be closing ahead of the GDP release and in the run-up to the US fiscal ramp, but for the next week, we remain short USDCAD in options and long NZDUSD in cash", added Normand.
JP Morgan analysts consider normal to see "firmer FX in countries where the growth consensus has been stable-to-higher (EUR, AUD, NZD, MXN, RUB, PHP) and lower FX where growth has undershot expectations (CNY, BRL)", said analyst John Normand, pointing that every 1% change in Chinese real GDP growthdrives a 4%-5% change in commodity currencies, which would explain the AUDUSD and NZDUSD ranges and the risk of an extension soon if the key China Q3 GDP points to further slowdown. Data is due on October 18th: "The window for commodity currency strength may be closing ahead of the GDP release and in the run-up to the US fiscal ramp, but for the next week, we remain short USDCAD in options and long NZDUSD in cash", added Normand.
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