Intraday Market Thoughts

AUD Leads as Risk Rally Continues. Latest Premium Trades are up

by Adam Button
Oct 25, 2011 0:55

Positive corporate news and dovish talk from the Fed boosted sentiment as the weary market continues to await news from Europe. The Australian dollar was the top performer once again while USD lagged. Early in Asia-Pac trading, NZD fell as the CPI cast doubt on rate increases. Aussie CPI IS DUE WEDNESDAY NOT TUESDAY. Latest Premium Trades are up.

Despite moderate volatility, volumes across markets were low as traders rest on the sidelines ahead of an ECB resolution.

Nearly 40% of the S&P 500 releases earnings this week so there is an understandable focus on the corporate sector as macro players await news from Europe and US Q3 GDP.

Three of the most influential Fed officials (Yellen, Tarullo and Dudly) talked about the possibility of QE3 and other stimulus measures in speeches on Monday. The comments weighed down the US dollar and aided broad risk sentiment.

News from Europe slowed to a trickle, although the FT is reporting that Greek bondholders are being asked to take a 60% haircut. Such steep losses are said to be possible of causing problems at European banks. Italy appears to be under further pressure from its neighbours to cut spending and Berlusconi called an emergency cabinet meeting on Monday.

EUR/USD trading was choppy, after opening the session 50 pips lower, the common currency jumped more than 2 cents to a high of 1.3956, where it stalled out twice. USD/JPY closed at its lowest ever, just above 76.00.

Overall sentiment may now be overstretched to the positive side with markets on a tremendous run since the start of October based on a European resolution and moderately positive US economic news.

Early in todays Asia-Pacific session, New Zealand released a quarterly CPI report that fell well short of estimates. Prices rose 0.4% in the quarter, far less than the +0.8% expected. NZD promptly fell 40 pips and the report cements our view that there will be no rate hikes for at least six months

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The long indicator remaining on the Asia-Pacific schedule is the Conference Boards consumer confidence report for Australia. The prior reading was -0.1% and some modest improvement is likely. In any case, there is unlikely to be a reaction from AUD.


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