MARKET TALK: USD/CAD Indicators Point To Parity

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0753 GMT [Dow Jones] USD/CAD structure and momentum is still bearish, and suggests further slippage toward 1.02 and 1.0130, says Lehman Brothers. The bank adds that weekly indicators suggest an extension to parity or the June 1976 low of 0.9630. Topside, resistance is seen at 1.0350, or 1.0395 should cap. USD/CAD now at 1.0277. (GST)

0752 GMT [Dow Jones] With all the attention on the FOMC monetary policy meeting Tuesday, European government bonds will probably trade cautiously until the rate announcement (around 1815 GMT), says Alessandro Mercuri, a strategist at ABN Amro. Adds, "we call for a 25bp cut both today and in October." The market is fully pricing in a 25bp cut in the Fed Funds rate, with a 50/50 chance of a 50bp cut, according to John Wraith, head of strategy at Royal Bank of Scotland. (KJE)


0752 GMT [Dow Jones] Pakistan call money rate ends flat, but funds shortage in interbank market pushes banks to central bank's discount window for second consecutive session; call rate closes at 9.90% unchanged from the previous close. With no major cash inflows scheduled this week, rates likely to remain firm Wednesday and more discounting expected. Cash demand to remain high as corporate tax payments due in September. "There is heavy cash demand, and as the market is tight, there is no option for the banks but to go to the discount window," says dealer. (ARA)


0749 GMT [Dow Jones] Sensex +0.5% at 15578.32, led by bargain buying in select index stocks, aslo helped by European market opening. Expect index to trade volatile, in 15400-15700 band for the day. Overall, market breadth positive with 1,745 shares up, 920 shares down on BSE. "There is buying in shares which have underperformed in the recent rally. But, volume is relatively low in index stocks suggesting investors remain cautious before the FOMC meeting," says dealer; adds, quantum of rate cut, any word on slowdown in the U.S economy to determine future trend in market. ICICI Bank (532174.BY) +2.2% at INR914.15, SBI (500112.BY) +0.6% at INR1,656.20. ONGC (500312.BY) +1.2% at INR845.75, Bharti Airtel (532454.BY) +2.3% at INR833. But, Cipla (500087.BY) off 1.8% at INR168.90. (GSV)

0748 GMT [Dow Jones] EUR/GBP's upside bias is totally intact while the rate holds above the last intra-day low of 0.6905, notes ABN Amro. Topside, the break of the recent peak at 0.6947 opens the door toward at least 0.7021 and potentially 0.7107 says the bank. EUR/GBP now trades at 0.6949. (GST)


0746 GMT [Dow Jones] Indonesian government Tuesday sells IDR3 trillion in two-year bonds with zero coupon at average yield of 8.74%; amount higher than IDR2 trillion target as receives IDR6.48 trillion in total bids; good demand perhaps signals Indonesian markets starting to recover after recent U.S. subprime crisis damaged sentiment. (IMS)


0745 GMT [Dow Jones] Philippine August budget surplus at PHP13.9 billion, lower than PHP15.36 billion goal as improved revenue collection outdone by extra spending; still, markets likely to welcome budget news since January-August deficit of PHP25.5 billion is narrower than PHP36.92 billion limit for period due to privatization receipts. Finance Secretary Teves says August results puts government firmly on track to stay within PHP63 billion deficit for 2007. (SFL)


0741 GMT [Dow Jones] KRW IRS rates fall about 1 bp on short-covering by banks near end of day's trade, but relatively quiet most of session as players take to sidelines ahead of U.S. Fed rate decision; 3-year rate closes around 5.22%, 5-year at 5.26%. "Players have priced in a 25-basis-point rate cut in the U.S., so the market wouldn't move much tomorrow. But if there is a cut of 50 basis points or more than the market IRS rates will fall further," says trader. CCS-IRS basis narrows in 1-year by 3 bps to around minus 115 due to rise in USD/KRW in spot, but swap basis widens by 2 bps in 2-3 year tenors; "Narrowing in shorter term swap basis will be limited when the Fed cuts rates because there will be increase in dollar selling in the forward market," trader says. (JYY)

0740 GMT [Dow Jones] The Bank of England's provision of additional liquidity is hardly surprising following the UK Treasury's decision Monday to guarantee the deposits at Northern Rock as the rout threatens to spread to other banks. "The step has opened up considerable debate regarding its merits, with many questioning whether the government has introduced moral hazard by its actions," says Calyon. The bank suggests the GBP's immediate fortunes may now rest on the length of queues outside Northern Rock. "But," it adds," with the news headlines likely to remain grim, the downside risks for GBP will persist." (NEH)

0740 GMT [Dow Jones] Calyon says domestic case for lower Hungarian rates remains compelling. Notes that macroeconomic indicators are pointing toward slower economic growth while CPI pressures are declining fast. In addition to a 25bp move next Monday, Calyon expects a further 75bp of cuts during the final quarter of the year, taking the key repo rate to 6.75% by December. Two-year swap rates, which have eased from more than 7.5% in mid-August to 7.17% at present, still have significant scope to decline further, Calyon adds. (EHB)

0740 GMT [Dow Jones] SNB leaves its one-week repo rate unchanged at 2.08%. The offering of cheap funds in the money market is seen as a move to offset last week's increase in the benchmark, the 3-month Swiss franc Libor, to 2.75% from 2.50%. SNB's President Roth pointed out in a speech late Monday that the central bank refrained from saying that it has a tightening bias when it hiked rates last Thursday. (AAG)

0739 GMT [Dow Jones] The NOK may continue to strengthen in the near-term as oil prices surge, says Ylva Sovik of Handelsbanken. However, "we see a weaker NOK when Norges Bank revises down their interest rate trajectory Oct. 31." Handelsbanken last week revised its rate outlook downward to a peak of 5%. Norges Bank forecast a 5.5% peak, but the forecast was made prior to the recent financial market unrest. EUR/NOK edges lower to 7.799 from 7.802 at 0600 GMT. (JLS)

(END) Dow Jones Newswires

September 18, 2007 03:53 ET (07:53 GMT)