Tuesday 23rd August 2011
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US equity markets stabilised, while treasury yields, commodities and risky currencies rose. There was no news of significance to drive price action, rather an expectation that this Friday’s Fed meeting in Jackson Hole will result in “something” being signalled, most of the view that the hurdles for another round of quantitative easing at present are too high. The S&P500 bounced almost 2% at the physical open but could not sustain the move and is currently up only 0.4%. The CRB commodities index is up 0.7%, oil up 2.3%, copper down 0.7%, silver up 1.7%, and gold up 2.1% to a fresh record at $1895. US 10yr treasury yields are 4bp higher at 2.10%, earlier peaking at 2.13%.
The US dollar index consolidated around 74.0. EUR rose during the London morning from 1.4347 to 1.4434 but reversed with US equities to 1.4364. Defensice Swiss franc underperformed, USD/CHF rising from 0.7839 to 0.7907. USD/JPY was effectively frozen at 76.75 throughout. AUD largely followed US equities, rising from 1.0383 to 1.0473 and slipping back to 1.0409 before consolidating. NZD outperformed, rising from 0.8163 to 0.8279 and consolidating above 0.8240. That outperformance saw AUD/NZD fall from 1.2740 to 1.2610.
AUD/USD and NZD/USD outlook next 24 hours: AUD’s recent rise looks corrective and 1.0475 should cap price action today. RBA Deputy Governor Battelino speaks in Sydney at 2pm. NZD should remain capped at 0.8300. The RBNZ’s inflation expectation survey should slip a little with recent fuel prices, but not by enough to trouble the NZD.
Source: Westpac Global Markets Strategy Group
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