Sharechat Logo

Morning FX thoughts - 12 Jan '12

Westpac Global Markets Strategy Group

Thursday 12th January 2012

Text too small?

Mild risk aversion. The London and NY sessions saw little major news flow although there was enough to halt the new year’s rise in sentiment.

Equities merely stalled, but the EUR fell and safe-haven bonds rallied. Fitch ratings agency said the ECB should ramp up its purchases of troubled European countries’ debt, particularly Italy’s, to avoid a cataclysm. There were also rumours France had been given notice of an imminent downgrade, subsequently denied by French officials.

The S&P500 is currently down 0.1%, hugging a trend support line dating from 19 December. The CRB commodities index is down 0.4%, oil -0.5%, copper +0.9% and gold +0.4%.

US 3mth Libor drifted 0.3bp lower to 0.577%, hinting at stabilisation in global funding markets for now. US 1-0yr treasury yields signalled less comfort with the global outlook though, falling from 1.97% to 1.90% during the London afternoon. The 10yr auction was strong, awarded at a record low yield of 1.90%. The German 5yr government bond auction was also strong, suggesting safe-haven demand.

The US dollar index is around 0.5% higher. That is mainly due to EUR weakness, probably influenced by the negative implications of the Fitch comments above. It fell from London morning’s 1.2788 to 1.2662, a Sep-10 low.

USD/JPY spiked to 77.04 and retreated to 77.86. AUD ranged, rising to 1.0328 before the EUR slide and then falling to 1.0263 before recovering to 1.0305.

NZD ranged sideways between 0.7926 and 0.7964. AUD/NZD drifted slightly lower, from 1.2960 to 1.2940.

AUD/USD and NZD/USD outlook next 24 hours: There’s a full event calendar for markets today. The US Beige book of economic conditions will be released shortly and China’s inflation reading is this afternoon. Most important will be tonight’s ECB meeting, no new stimulus expected but the possibility of market-disappointing comments. Italian and Spanish bond auctions will be watched. AUD remains capped by 1.0385 resistance and is biased to test 1.0200 today. NZD is testing 0.7965 minor resistance but a move beyond 0.8000 today is unlikely.


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
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

IRG See IRG research reports