Sharechat Logo

Morning FX thoughts - 13 Oct '11

Westpac Global Markets Strategy Group

Thursday 13th October 2011

Text too small?

European rhetoric extends rallies.

European Commission president Barroso presented a roadmap to solve the European debt crisis including bank recapitalisation, Greek payments, and a European rescue fund, and markets took this as a sign of growing resolve from officials.

Additional market support came from Slovakia, which agreed to approve the EZ bailout fund (21 July version) in a 14 October vote, and EZ industrial production which improved and beat estimates.

The Eurostoxx 50 closed 2.4% higher, and the S&P500 is currently up 1.7% (it has risen 1.3% post Barroso).

Commodities followed suit, the CRB index +0.4%, oil +0.2%, copper +3.1%, and silver +2.1%.

US 10yr treasury yields are 9bp higher at 2.24%, the 2-10yr curve 10bp steeper. A 10yr auction was weak, 3bp above market yield and the 2.9 bid-cover ratio below the 3.1 year average.

The FOMC minutes contained no surprises, policymakers monitoring the recovery but ready to act further if necessary (QE3 was promoted as an option by some members).

The US dollar index fell almost 1% as safe havens were shunned. Ultimate safe-haven yen underperformed all, USD/JPY bouncing from 76.31 to 77.49 and forming a technically bullish key day reversal.

EUR rose from 1.3650 to 1.3834 – a one-month high. AUD outperformed (along with NZD), surging from 0.9940 to 1.0207. NZD similarly rallied from 0.7840 to 0.7996. AUD/NZD firmed with risk sentiment from 1.2710 to 1.2780.

AUD/USD and NZD/USD outlook next 24 hours: The upward corrections remain intact, although the recent moves have stretched the currencies such that small intraday pullbacks are possible. AUD has broken successive upside targets and now looks to the 62% retracement level of 1.0240 above. If NZD can hold above the key 0.7960, 0.8120 beckons. Australia’s employment report today is important, and China’s trade balance will be watched.


  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