Daily Currency Briefing

July 29, 2011

No light at the end of the tunnel

G10 Currencies
EUR-USD: After hours of debate the Speaker of the US House of Representatives John Boehner (Republican) cancelled the vote on his savings programme which had been planned for yesterday. It remains unclear whether it was just postponed again or cancelled completely. Boehners Plan not only met opposition from the Democrats but also from within his own ranks. However, getting the proposal through the House of Representatives would have been only the first hurdle, anyway. The Senate, which is dominated by the Democrats, would probably have rejected the proposals. The developments illustrated once again that there is not just disagreement between the parties but that the Republicans also seem to be hopelessly divided. Doubts as to how an agreement can be reached in time are likely to rising. Yesterdays letter by the largest US financial institutions asking the politicians to come to an agreement illustrates just how nervous the financial world is. Despite the situation coming to a head the euro has been unable to benefit against the US dollar easing below the 1.43 mark temporarily yesterday. Markets are waiting for further details regarding the agreement reached at the EU summit last week. Moreover the countries still have to vote on an increase of the EFSF funds and its extended responsibilities. The measures are fire fighting in one spot without putting out the flames completely. The danger of contagion does not seem to have been overcome as the rising spreads of Spanish and Italian bonds illustrate. On the data front the first estimate of Q2 GDP data in the US is due today. We expect weak growth at an annualised 1.5%. In addition to the debt problem we might see economic concerns putting pressure on the dollar. The reaction is however likely to be more pronounced in USD-CHF and USD-JPY. US economy is still stuck in second gear US GDP, qoq change in %, annualized
6 4 2 0 -2 -4 -6 -8 2007
You-Na Park +49 69 136 42155 you-na.park@commerzbank.com

2008

2009

2010

2011

Source: Bureau of Economic Analysis, Commerzbank Research

CAD: Compared with AUD and NZD the CAD is currently an underperformer. While the US economic data does not really convince and the oil price is moving sideways the loonie is having a difficult time but has at least held steady. The Canadian GDP data for May is likely to attract relatively little attention as the US GDP for Q2 and the political upheaval surrounding the

Antje Praefcke +49 69 136 43834 antje.praefcke@commerzbank.com

For important disclosure information please refer to the back pages

Daily Currency Briefing

debt ceiling are more important for the market. That means that in USD-CAD the USD will remain the driving force. If the US GDP disappoints and remains below market expectations USD-CAD might ease a little further. But as the area around 0.9400-20 in USD-CAD was not breached to the downside at the beginning of the week, it is unlikely that the level will fall ahead of the weekend. If Q2 growth in the US is abysmal concerns about a cooling of the US and as a result also the Canadian economy will prevent more notable CAD gains. If US GDP surprises on the upside USD will appreciate. Conclusion: one way or the other CAD will continue to trail the best-in-class AUD and NZD ahead of the weekend.

SEK: The Swedes felt generous in June, retail sales rose by an impressive 3.1% mom and by 3.4% yoy. With support like that SEK was able to retrace the previous days losses yesterday. Swedish Q2 GDP is due for publication today. Following +0.8% in Q1 the momentum is likely to have weakened to 0.6% qoq, but should have remained above average. A weaker result will however quickly put renewed pressure on SEK, in particular if uncertainty on the markets remains high. Only an exceptionally good result might make it possible for the 9.0550 area in EUR-SEK to be breached ahead of the weekend and to lead to a test of the early July low at 9.045.

Antje Praefcke +49 69 136 43834 antje.praefcke@commerzbank.com

Emerging Market Currencies

PLN: Does the private sector in Poland belief the story? The inflation rate in June had fallen notably from 5.0% to 4.2% yoy which brought out the first doves among the monetary policy committee (MPC). The hawks among the MPC on the other hand assume that the fall in June was a one-off so that a further rate step will be required in September/October. Todays inflation expectations of the private sector might be of the essence. Should inflation expectations have recorded a notable rise that is likely to support the zloty once again causing EUR-PLN to aim for the next support level at 3.97. TRY: The liras topsy turvy world? The Turkish central bank (CBRT) once again presented a dovish inflation report yesterday and nonetheless the lira appreciated by more than 1% against the euro and the US dollar. The central bank seems as far away from a rate hike as ever. According to central bank governor Erdem Basci the current rate level is suited to keep price pressure under control. He even repeated that monetary policy would be eased should the situation on the global markets deteriorate further. The authorities were in a position to react to a sudden stop of capital inflow and the development of the lira did not constitute a problem. It is being completely ignored that the peculiar mix of low interest rates and increased reserve requirements is having hardly any effect. The economy is showing the first signs of over-heating and inflation is everything but under control. Nonetheless Basci clearly succeeded in calming the markets temporarily. Disappointing trade balance data could well end this positive sentiment though and monetary policy remains a negative factor for the lira. BRL: The minutes of the last central bank meeting confirmed that we might see a break in the rate hike cycle. According to the central bank the inflationary outlook has improved. There was no assertion in the minutes that monetary policy would have to be adjusted within an appropriate period of time, as had been the case in the statement published directly after the rate decision. A break is not a fait accompli yet though. The central bank is likely to base its decision on the upcoming data releases. Consumer prices are due for publication next Friday. There was more news regarding the new tax on derivatives. It would seem that the tax will only be imth posed as of 5 October. Apparently more time is needed to implement the tax. The real was able to stabilise largely yesterday having depreciated considerably against the USD on Wednesday following the announcement of the tax. As no important data is due for publication in Brazil, the real is likely to remain subject of general market sentiment.
Carolin Hecht +49 69 136 41505 carolin.hecht@commerzbank.com

Carolin Hecht +49 69 136 41505 carolin.hecht@commerzbank.com

You-Na Park +49 69 136 42155 you-na.park@commerzbank.com

29 July 2011

Daily Currency Briefing

Todays Events
Time 00:01 00:30 Region Indicator GBP JPY GfK Consumer Confidence CPI ex fresh food ex fresh food and energy Unemployment rate Industrial production Nationwide House Price Index Retail sales Trade balance Producer price index GDP
Mortgage approval Consumer price index Trade balance GDP annualized GDP Chicago PMI Michigan consumer confidence

Period Aug Jul Jul Jul Jul Jul Jul Jul Jul Jun Jun Jun Jun Jun Apr
Apr Jun Jul Jun Q2 May Jul Aug

Actual yoy yoy mom % mom yoy mom yoy mom yoy USD bn mom yoy qoq
yoy K yoy ZAR bn qoq mom -30 +0,2 +0,4 +0,3 4,6 +3,9 -1,6

Our Forecast
+0,1

Survey -26 +0,0 +0,2 +0,1 4,6 +4,5 -1,2 -0,2 -0,8 +1,7 -1,6 -9,50 +0,2 +0,6

Last -30 +0,5 +0,4 +0,3 4,6 +3,9 -1,6 +0,0 -1,1 -2,5 +2,2 -10,06 +0,1 +1,2 +0,8
+6,4 46 +2,7 -1,0 +1,9 +0,0 61,1 63,8

Direction

Cross

00:30 00:50 07:00 07:00 08:00 08:00 08:30

09:30 10:00 13:00 13:30 13:30 14:45 14:55

JPY JPY GBP GER TRY HUF SEK

GBP EUR ZAR USA CAD USA USA

4,6 +5,0 -0,7

+2,5 -6,5

46 +3,0 +1,5 62,0 63,8

+5,0 46 +2,7 1,0 +1,8 +0,1 60,0 64,0

Important Market Data

FX Current Change (%) Last trading day's high Last trading day's low FX Current Change (%) Last trading day's high Last trading day's low FX Current Change (%) Last trading day's high Last trading day's low FX Current Change (%) Last trading day's high Last trading day's low Forwards / Options EUR-USD 3M Money Market Rate (%) Bonds / Bond Futures Yield (%), Price Equity Indices Closing Change Change (%) Oil / Prec.Metals $ per unit EUR-USD 1,4293 -0,49 1,4400 1,4255 EUR-SEK 9,1033 -0,07 9,1344 9,0513 EUR-AUD 1,3048 +0,05 1,3053 1,2929 EUR-RUB 39,4750 -0,21 39,6667 39,3953 Fwd 3M -34,6700 EURIBOR 1,61 10Y Bund 2,63 EuroStoxx50 2692,76 -0,95 -0,04 Oil, Brent 117,24 EUR-JPY 110,82 -1,24 112,25 110,84 EUR-NOK 7,7475 -0,10 7,7721 7,7181 EUR-NZD 1,6498 -0,18 1,6550 1,6343 EUR-RON 4,2439 -0,04 4,2533 4,2381 Fwd 6M -67,5400 $ LIBOR 0,25 10Y T-Note 2,93 DAX 7190,06 -62,62 -0,86 Oil, Nymex 97,04 EUR-GBP 0,8754 -0,49 0,8805 0,8737 EUR-DKK 7,4495 -0,04 7,4545 7,4482 EUR-BRL 2,2360 -0,56 2,2567 2,2199 EUR-CNY 9,2064 -0,52 9,2759 9,1861 Fwd 12M -128,0400 LIBOR 0,20 10Y JGB 1,09 Dow Jones 12240,11 -62,44 -0,51 Gold 1613,35 EUR-CHF 1,1440 -0,87 1,1541 1,1424 EUR-HUF 268,98 +0,17 269,27 266,96 EUR-MXN 16,8055 +0,40 16,7853 16,6063 EUR-SGD 1,7223 -0,33 1,7316 1,7146 Vol 1M 12,25 LIBOR 0,83 EUR-CAD 1,3598 -0,20 1,3653 1,3508 EUR-CZK 24,190 -0,26 24,276 24,160 EUR-TRY 2,4054 -1,06 2,4359 2,3895 EUR-KRW 1505,5140 -0,35 1515,1173 1499,3574 Vol 3M 12,45 $ index 74,22 +0,18 74,41 73,88 EUR-PLN 4,0141 -0,26 4,0287 3,9987 EUR-ZAR 9,6497 +0,73 9,6111 9,5307 EUR-THB 42,5003 -0,54 42,8022 42,3225 Vol 12M 12,89

CHF LIBOR CAD LIBOR 0,18 1,18 10Y T-Note 10Y Gilt Bund Future Future 2,97 129,43 124,64 Nikkei 225 9825,40 -75,95 -0,77 Palladium 826,00 Zinc 2479,5 FTSE 100 5873,21 +16,63 +0,28 Platinum 1778,00 Tin 28750,0 1300,67 -4,22 -0,32 Silver 39,52

S&P 500

Industrial Metals Aluminium Lead Copper Nickel $ per ton 2601,0 2680,0 9744,0 24370,0 Sources: Bloomberg L.P., European Banking Federation, British Bankers Association, Dow Jones, Xetra, S&P, TSE, LSE, LME.

29 July 2011

Daily Currency Briefing

This document has been created and published by the Corporates & Markets division of Commerzbank AG, Frankfurt/Main or Commerzbanks branch offices mentioned in the document. Commerzbank Corporates & Markets is the investment banking division of Commerzbank, integrating research, debt, equities, interest rates and foreign exchange. The author(s) of this report, certify that (a) the views expressed in this report accurately reflect their personal views; and (b) no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or views expressed by them contained in this document. The analyst(s) named on this report are not registered / qualified as research analysts with FINRA and are not subject to NASD Rule 2711. Disclaimer This document is for information purposes only and does not take account of the specific circumstances of any recipient. The information contained herein does not constitute the provision of investment advice. It is not intended to be and should not be construed as a recommendation, offer or solicitation to acquire, or dispose of, any of the financial instruments mentioned in this document and will not form the basis or a part of any contract or commitment whatsoever. The information in this document is based on data obtained from sources believed by Commerzbank to be reliable and in good faith, but no representations, guarantees or warranties are made by Commerzbank with regard to accuracy, completeness or suitability of the data. The opinions and estimates contained herein reflect the current judgement of the author(s) on the data of this document and are subject to change without notice. The opinions do not necessarily correspond to the opinions of Commerzbank. Commerzbank does not have an obligation to update, modify or amend this document or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. The past performance of financial instruments is not indicative of future results. No assurance can be given that any opinion described herein would yield favourable investment results. Any forecasts discussed in this document may not be achieved due to multiple risk factors including without limitation market volatility, sector volatility, corporate actions, the unavailability of complete and accurate information and/or the subsequent transpiration that underlying assumptions made by Commerzbank or by other sources relied upon in the document were inapposite. Neither Commerzbank nor any of its respective directors, officers or employees accepts any responsibility or liability whatsoever for any expense, loss or damages arising out of or in any way connected with the use of all or any part of this document. Commerzbank may provide hyperlinks to websites of entities mentioned in this document, however the inclusion of a link does not imply that Commerzbank endorses, recommends or approves any material on the linked page or accessible from it. Commerzbank does not accept responsibility whatsoever for any such material, nor for any consequences of its use. This document is for the use of the addressees only and may not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose, without the prior, written consent of Commerzbank. The manner of distributing this document may be restricted by law or regulation in certain countries, including the United States. Persons into whose possession this document may come are required to inform themselves about and to observe such restrictions. By accepting this document, a recipient hereof agrees to be bound by the foregoing limitations. Additional notes to readers in the following countries: Germany: Commerzbank AG is registered in the Commercial Register at Amtsgericht Frankfurt under the number HRB 32000. Commerzbank AG is supervised by the German regulator Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin), Lurgiallee 12, 60439 Frankfurt am Main, Germany. United Kingdom: This document has been issued or approved for issue in the United Kingdom by Commerzbank AG London Branch. Commerzbank AG, London Branch is authorised by Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin) and subject to limited regulation by the Financial Services Authority. Details on the extent of our regulation by the Financial Services Authority are available from us on request. This document is directed exclusively to eligible counterparties and professional clients. It is not directed to retail clients. No persons other than an eligible counterparty or a professional client should read or rely on any information in this document. Commerzbank AG, London Branch does not deal for or advise or otherwise offer any investment services to retail clients. United States: This document has been approved for distribution in the US under applicable US law by Commerz Markets LLC (Commerz Markets), a wholly owned subsidiary of Commerzbank AG and a US registered broker-dealer. Any securities transaction by US persons must be effected with Commerz Markets. Under applicable US law; information regarding clients of Commerz Markets may be distributed to other companies within the Commerzbank group. This report is intended for distribution in the United States solely to institutional investors and major U.S. institutional investors, as defined in Rule 15a-6 under the Securities Exchange Act of 1934. Commerz Markets is a member of FINRA and SIPC. European Economic Area: Where this document has been produced by a legal entity outside of the EEA, the document has been re-issued by Commerzbank AG, London Branch for distribution into the EEA. Singapore: This document is furnished in Singapore by Commerzbank AG, Singapore branch. It may only be received in Singapore by an institutional investor as defined in section 4A of the Securities and Futures Act, Chapter 289 of Singapore (SFA) pursuant to section 274 of the SFA. Hong Kong: This document is furnished in Hong Kong by Commerzbank AG, Hong Kong Branch, and may only be received in Hong Kong by professional investors within the meaning of Schedule 1 of the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made there under. Japan: Commerzbank AG, Tokyo Branch is responsible for the distribution of Research in Japan. Commerzbank AG, Tokyo Branch is regulated by the Japanese Financial Services Agency (FSA). Australia: Commerzbank AG does not hold an Australian financial services licence. This document is being distributed in Australia to wholesale customers pursuant to an Australian financial services licence exemption for Commerzbank AG under Class Order 04/1313. Commerzbank AG is regulated by Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin) under the laws of Germany which differ from Australian laws. Commerzbank AG 2011. All rights reserved. Version 9.13

Commerzbank Corporates & Markets Frankfurt London Commerzbank AG Commerzbank AG London Branch DLZ - Gebude 2, HndPO BOX 52715 lerhaus 30 Gresham Street Mainzer Landstrae 153 London, EC2P 2XY 60327 Frankfurt Tel: + 49 69 13621200 Tel: + 44 207 623 8000

New York Commerz Markets LLC 2 World Financial Center, 31st floor New York, NY 10281 Tel: + 1 212 703 4000

Singapore Branch Commerzbank AG 8, Shenton Way, #42-01 Singapore 068811

Hong Kong Branch Commerzbank AG 29/F, Two IFC 8 Finance Street Central Hong Kong Tel: +852 3988 0988

Tel: +65 63110000