Morning FX thoughts - 15 Feb '12

Westpac Global Markets Strategy Group

Wednesday 15th February 2012

Risk markets retreated further. Yesterday’s negative ratings announcements from Moody’s on European sovereigns were seemingly shrugged off during the London session, strong readings from European business confidence surveys partly helping, but a disappointing headline US retail sales reading was one catalyst for the NY session’s selloff.

That was followed by news from Eurozone finance ministers that their scheduled meeting tonight to rubber stamp the next Greek bailout package of EUR130bn would be delayed because the “paperwork was not ready”. The WSJ took the view that Greece has not yet done enough to clinch the package. The S&P500 is currently down 0.5% and is threatening a downside break of two-month old ascending channel.

The CRB commodities index is unchanged, oil -0.2%, copper -0.8%, and gold -0.3%. US 10yr treasury yields are 4bp lower at 1.93%. Fed hawk Plosser said further easing is unnecessary but he added now is not the time to tighten.

The US dollar index is around 0.5% stronger at a two-week high. EUR initially recovered during the London morning from 1.3128 to 1.3216, but then slumped to 1.3100 with the negative news above. Weaker EZ industrial production data also weighed. The yen underperformed on the day, mainly due to the BOJ’s surprising increase of its QE program., USD/JPY up from 76.60 to 78.49. – a four month high. AUD initially rose from 1.0664 to 1.0733 but slumped after midday London to 1.0654. NZD similarly rose from 0.8287 to 0.8349 and fell to 0.8290. AUD/NZD slipped from 1.2880 to 1.2840, closing in on major 1.2800 support.

AUD/USD and NZD/USD outlook next 24 hours: Local data (Australian consumer confidence and vehicle sales, NZ Q4 retail sales volume) is minor for markets compared to tonight’s Eurozone GDP data and the US FOMC minutes. AUD looks heavy and a test of minor support at 1.0640 today is expected. NZD also looks weak, a break below ascending channel support at 0.8280 increasing our confidence in a multi-month bearish outlook.

Comments from our readers

No comments yet