Majors & Scandies
The housing sector started the financial turmoil and for the time being, the focus in the FX and money markets remains among other things on the housing sector. RICS from the UK unveiled the worst figures since it started compiling data approximately 30 years ago. The pound is once again the 'victim' of the financial turmoil led by weakening housing markets and the consequence as we see it, is that the pound will be under pressure once again today.
RICS blames the fall on the tightened lending conditions, which could also be observed when BoE cut interest rates by 25bps last week. BoE's bank rate was lowered to 5%, however, the GBP Libor fixings did hardly move from before the announcement and mortgage lenders did not lower their mortgage rates either. From the US, the NAHB Housing Index is due in the evening and will give us an indication of the degree of the optimism (pessimism?) in the US housing sector. The neutral limit for the NAHB is around 50 whereas the figure was 20 last month. We are quite pessimistic about today's release and market surveys calls for a figure around 20 this month as well.
ZEW from the Eurozone and CPI from the UK will most likely draw a great deal of attention today as well. Especially, CPI from the UK will be interest to follow since the central bank cut interest rates last week even though inflation is still above target rate
Emerging Markets
Surprisingly EM currencies went off to a good start Monday. It was surprising on the back of a stronger JPY and 3 % lower equity markets in Asian. However during Monday the sentiment went negative and currencies like ISK, TRY and ZAR dropped more than 1 per cent against EUR.
Today we expect a neutral day. We have Polish CPI-data on EM today and PPI from the US. Both set of data are second tier data. However the market looks forward to an amount of more important events later this week. We look forward to interest rate meetings in Brazil (Wednesday), Turkey (Thursday) and Mexico (Friday). On the global scene we get important data from the US (CPI, Industrial production and Beige Book) and important company earnings (among others JP Morgan, Merrill Lynch and Citi).
