NOK: strength of the Norwegian economy leads to NOK buying
Recent support for the NOK is primarily due to a combination of structural factors (positive credit and external fundamentals) overlaid with the improvement in domestic growth (4%oya)…….
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Whilst UK Q2 GDP growth has been revised higher from ‐0.7% to ‐0.5%, the economy is still performing poorly. In contrast to Norway, the UK housing market growth is the weakest in Europe.
It remains a puzzle why the BoE’s aggressive QE is having such little net impact on GBP. The BoE is up to its seventh round of asset purchases and may potentially expand QE in 2013. The increasingly divergent outlook for Norwegian and UK monetary policy is likely to continue into the fourth quarter. We are recommending short GBP vs. NOK positions via cash and options.
PLN: central bank rate cut expectations likely overdone
MXN: growth data and inflows remain supportive of the peso
Retail sales in June increased 5.6%yoy, showing some moderation relative to 1Q12, but still growing at a robust pace.
Similarly, credit growth has moderated, but is still growing 18%yoy. Supportive credit flows and employment growth, an increase in workers’ remittances and moderate real wage gains are likely to support consumer spending in the near‐term.
Current account data for Q2 highlighted the strength of the USD inflows coming into Mexico this year that support our forecast of USDMXN at 12.00 by mid‐2013. Exports increased to USD94.5bn in 2Q12, while inflows into the local fixed income market remain robust at USD19.6bn YTD. For now, USDMXN spot price action has been fairly range bound, with the pair trading within the 13.05‐13.25 level, but we remain confident in our mid 2013 price target of 12.00.
MYR: resilient fundamentals
Weekly Currency Thought: Focus remains on Central Banks for the USD and EUR
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