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EMEA Weekly: Be careful with the rand

- Market movers ahead: Turkish inflation and Hungarian Minutes
"On Monday, we will get Turkish inflation statistics for June. In our view, the figures will confirm that inflationary pressures remain elevated in Turkey and that CPI-inflation has moved back to double-digit numbers. Hence, we put Turkish inflation (CPI) at exactly 10.0% y/y for June."
"On Wednesday, we will get the minutes from the latest Monetary Council meeting in Hungary. The meeting was held just as volatility in the Hungarian markets was spiking. It will be interesting to read how the Monetary Council members viewed the market turmoil and the reasons for the turmoil."
- FX Outlook: Rand could be heading for trouble
"The World Cup apparently has helped support the South African rand in the past couple of months and the continued strengthening of USD has probably also helped the rand outperform its Central and Eastern European peers. However, we think that we could be heading for a larger correction in the rand as the World Cup draws to an end. Furthermore, it is pretty clear from our EMEA FX Scorecard that both short- and longterm indicators point in the direction of a weaker rand going forward. All the sub scores are negative for the rand – weak macro, carry erosion, negative impact from global conditions (rising risk aversion), a fundamentally overvalued currency and negative technical picture. In fact, the only two factors playing in favour of the ZAR are the World Cup (but that will soon end) and high gold prices (which also have been losing some steam in recent days)."
"We would therefore recommend investors be short in the rand going into next week as we could soon be heading for a large negative correction in the rand."
- Komorowski versus Kaczyński
"On Sunday, Poles will have the opportunity to vote in the second round of the country’s presidential elections. Opinion polls indicate that it will be a close race between the liberal-conservative acting president Bronisław Komorowski and the social-conservative Jarosław Kaczyński. However, most opinion polls indicate that Komorowski will win on Sunday. We believe this result would be positive for the markets and could help push the zloty (slightly) higher going into next week but nothing is given and the possibility of Kaczyński winning does exist. His victory would probably trigger a negative reaction in the Polish markets."
- Scorecard trade of the week : Buy CZK/ZAR
"Last week, we recommended buying PLN/HUF based on our EMEA FX Scorecard. That trade was more or less flat over the week. This week, the Czech koruna is the highest scoring currency while the South African rand is the lowest. We therefore recommend - based on the EMEA FX Scorecard - to buy CZK/ZAR going into next week."
DenDanske EMEA Weekly 20100702

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