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Morning FX thoughts - 19 Sept '11

Westpac Global Markets Strategy Group

Monday 19th September 2011

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The major asset class markets had mixed performances.

The S&P500 closed up 0.6% and the Eurostoxx 50  closed up 0.2%, although commodities fell 0.9%, and US treasury yields fell.

The weekend’s meeting of EU finance ministers produced little apart from supportive rhetoric and a decision to delay the next tranche of the Greek bailout until early October. That decision, and news that Germany had deferred discussion on the European Stability Mechanism, seemed to cap the recent multi-day rally in risk markets.

Maintaining the focus on Europe, Moody’s announced it was continuing its review of Italy for possible downgrade and a decision was likely within the next month – markets had earlier expected a decision by now.

The US 10yr treasury yield closed 3bp lower at 2.05%, earlier as high as 2.12%. Peripheral Eurozone bonds improved, the Greek 10yr 167bp lower at 21.19%.

The US dollar index ground modestly higher.

The EUR was weighed down by the above European news, slipping from an early NY peak of 1.3846 to close at 1.3796, and traded at 1.3736 at the NZ open this morning.

USD/JPY firmed from around 76.70 to 76.97 and opens at 77.00 this morning. AUD peaked at 1.0399 early NY and then slipped with the European headlines to 1.0357, trading at this morning’s open at 1.0352.

NZD slipped from its 0.8342 peak to 0.8282. AUD/NZD consolidated between 1.2445 and 1.2530.

AUD/USD and NZD/USD outlook next 24 hours: Having reached its first corrective target at 1.0400, AUD should slip to at least 1.0300 today. NZD has retraced 50% of its decline since 1 Sep, and is now ready to resume a move to 0.8120. The Westpac consumer confidence survey is released today.


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