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Morning FX thoughts - 1 Sept '11

Thursday 1st September 2011

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Risk appetite moderates a touch

US markets tacked in a bullish direction in the morning but sagged in the afternoon. Late-morning NY saw the S&P500 up almost 1.5% at one stage, while the AUD had another crack at breaking 1.07 and NZD hit marginal highs for this recent up-move at  0.8573, up around 35 ticks (+0.4%) from the London open.

A positive send-off from Europe helped US sentiment (Eurostoxx 50 finished up +2.80%) as did the not as weak as feared Chicago PMI. As the day wore on however sentiment waned. The S&P 500 limped into the close to be up just 0.3%. The AUD shed around 40pts from its highs to finish nearer 1.0680/90 while NZD gave back all its earlier gains and some to finish at 0.8520.

EUR was never interested, oscillating tightly around 1.4440 for much of the NY AM session before lurching down to 1.4360/70 in the afternoon. Copper finished up 1.2% while gold shed $11.30 finishing at $1823.80/oz.

Atlanta Fed Lockhart, a centrist not voter added to the long line of Fed speakers falling into line behind Bernanke. He said he cannot rule out that the Fed's low rate promise for 2-years won't go on for longer than that, depending on conditions and that he hasn't ruled out any policy options, including  easing further.

The US ADP private payrolls rose 91k in August, its second lowest gain for the year so far (May’s 35k was the weakest), and another sign that the labour market is softening. Also, Challenger reported that corporate layoff announcements rose 47% yr in August, behind July’s 59.4% yr growth but still the second fastest pace since the recession. The US Chicago PMI moderated from 58.8 to 56.5 in August, a much smaller decline than we have seen in all other regional factory surveys for August, but still the lowest headline reading for the Chicago index since late 2009.

Outlook: The NZD probably is also due some consolidation though on the day should find demand into 0.8500. The AUD has struggled to clear 1.07 convincingly for a couple days now, turning the near term outlook more consolidative The AUD should though run into buyers around the 1.0650 mark. Today sees NZ Q2 terms of trade while in Australia July retail sales and Q2 CAPEX data is on tap. The all important August US ISM will be released tonight.

Source: Westpac Global Strategy Group


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