EMEA Weekly: Will the summer calm hold?

- Market movers ahead: Inflation across the CEE and Turkish rate decision "Even though Turkish inflation continues to be well-above the Turkish central bank’s (TCMB) official inflation target of 6.5% and the recovery in the Turkish economy appears to be quite robust, the TCMB continues to keep its relatively dovish stance. Hence, the Turkish central bank will keep its wait-and-see stance in monetary policy keeping rates unchanged next week with the key policy rate at 6.5% at its next week’s MPC meeting. Inflation for June is due for release across the CEE region. See page 7, where we take closer look at the inflation outlook in the EMEA region."
- FX Outlook: Will the summer calm hold... likely not "The total score in the Scorecard – adding up the individual score for all of the currencies in the Scorecard – has during this week been the most negative since February 2009 – and it is of course well-known that that indication correctly forecast a major sell-off in the EMEA currencies in Q1 09. Hence, the fact that the overall score is now so negative is a clear signal to us that that investors should take off risk in the EMEA FX markets and we would be looking for some kind of overall correction to hit the EMEA FX markets sooner rather than later. The South African rand remains the lowest scoring currency in the EMEA FX Scorecard. It is notable that the rand not only scores poorly overall, but that all the sub scores look quite weak. Therefore we continue to recommend investors to be short in this currency."
- Scorecard-based trade of the week Buy RON/ZAR "Last week we recommend buying CZK/ZAR based on our EMEA FX Scorecard. That trade is up marginally over the week. This week the rand is still the lowest scoring currency in the EMEA FX Scorecard, while the Romanian leu is now the highest scoring currency in the Scorecard. We therefore recommend buying RON/ZAR going into next week."
DenDanske EMEA Weekly 20100709

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