Sharechat Logo

Morning FX thoughts - 2 Aug '11

Tuesday 2nd August 2011

Text too small?

Markets reeled after US manufacturing activity (ISM) plunged to a mid-2009 low. US equities held their post-debt agreement gains (+1.2%) until just before the release, the negative reaction leaving the S&P500 down 0.8% currently.

Commodities followed equities, the CRB index currently 0.2% lower, oil -0.8% and copper -1.6% (forming a technically bearish key reversal day).

China manufacturing data earlier in the day underwhelmed but had little market impact.

US 10yr treasury yields rose around 5bp to 2.85% during yesterday’s Asian session in response to President Obama’s announcement a debt ceiling and deficit agreement had been reached. The aftermath of the US data surprise, though, saw yields down to 2.72%.

The US dollar index was largely unmoved by the US debt ceiling agreement, gains versus the yen and franc offset by falls versus the riskier currencies which benefitted from the improvement in sentiment. It did, however, fall sharply in response to the US ISM.

EUR ground to a 1.4454 intraday peak before the US data pushed it to 1.4185. USD/JPY bounced from 77.30 to 78.05 after the debt agreement, but then slid to 76.30. A Nikkei report claimed the BOJ was preparing for yen intervention.

AUD benefitted from the debt news, rising 1.1010 to 1.1065, but started reversing during the London morning, reaching 1.0922. NZD failed to advance, falling to 0.8733 after the ISM. AUD/NZD ranged between 1.2500 and 1.2550.

AUD/USD and NZD/USD outlook next 24 hours: AUD has eked a 1.0910-1.1080 range during the past four days, requiring a break for directional guidance.

Today’s RBA meeting should leave rates unchanged, but markets will watch for offsetting  and inflation and consumption concerns. NZD momentum remains intact but it is becoming overbought, a wide 0.8620-0.8844 range likely to hold today.

Today’s wage cost report will be important.

Source: Westpac Global Markets



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar gains on G20 preference for growth
NZ dollar dips as Wellington CBD checked for quake damage
NZ dollar gains, bolstered by RBA minutes, strong dairy prices
NZ dollar falls after central bank says it may scale up currency intervention
NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street
NZ dollar trades little changed as US budget talks bear down on deadline
NZ dollar falls with equities on view US to sail over fiscal cliff
NZ dollar weakens as fiscal cliff looms, long bets unwind
NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
NZ dollar slips as fiscal cliff talks grind slower in Washington