Intraday Market Thoughts

Cautious Market Ahead of The Fed

by Adam Button
Dec 16, 2013 23:04

A boost in risk trades did little to spur movement in FX on Monday. The Swiss franc was the top performer while the Australian dollar lagged. The upcoming minutes of the December RBA meeting are another chance for Stevens to talk down the Aussie.  

The euro topped out at 1.3799 in European trading Monday as sellers ahead of the big figure and the annual high of 1.3832 capped the move. The resignation of Asmussen from the Bundesbank could mean a more hawkish replacement but the market will wait and see. At the moment, FX traders are reluctant to push the recent ranges ahead of the FOMC meeting but that could change with several key releases before the Fed including UK and US CPI as well as German economic sentiment surveys.

Stock markets made a rapid turn in Asian trading and that continued early in New York. S&P 500 futures were down 15 points in Asia but the market closed 11 points higher. The German DAX bounced from support to gain 1.7% on upbeat PMIs.

The better risk appetite might have been a chance for the Aussie bulls after 8 weeks of declines but there was little-to-no buying. In truth, the correlation between AUD and stocks has broken down to nearly nothing in 2013 and this was yet another example.

Economic data was mixed. The Empire Fed was at +1 compared to +5 expected and the Markit PMI was at 54.4 compared to the 55.0 consensus. On the upside, November industrial production rose 1.1% compared to 0.6% expected.

On Friday, former Fed vice chair Kohn said he would wait to taper and that gave the market more confidence. Gold rallied as high as $1252 before sinking back to $1241.

Up later, at 0030 GMT, the minutes of the December RBA meeting will be released. In the statement, Stevens called the Aussie 'uncomfortably high' and his anti-AUD comments last week sent AUD/USD near the cycle lows. The comments were partly misinterpreted but proved the power of jawboning with the momentum. Watch for more of the same in the minutes.

The latest Premium Insights issued new Pre-FOMC notes and trades on existing EURUSD, 2 on USDJPY and 2 on USDCAD, with 3 new charts. AUDUSD, GBPJPY and gold trades remain in progress.
Act Exp Prev GMT
CPI (NOV) (m/m)
0.2% 0.1% Dec 17 9:30
Core CPI (NOV) (y/y)
0.9% Dec 17 9:30
CPI (NOV) (y/y)
2.2% 2.2% Dec 17 9:30
CPI (NOV) (m/m)
-0.1% -0.1% Dec 17 10:00
CPI (NOV) (y/y)
0.9% 0.7% Dec 17 10:00
CPI - Core (NOV) (y/y)
1.0% 0.8% Dec 17 10:00
ZEW Survey - Economic Sentiment (DEC)
60.2 Dec 17 10:00
ZEW Survey - Economic Sentiment (DEC)
55.0 54.6 Dec 17 10:00
Manufacturing PMI [P]
54.4 54.9 54.7 Dec 16 14:00
Services PMI [P]
51.0 51.5 51.2 Dec 16 9:00
Services PMI [P]
54.0 55.5 55.7 Dec 16 8:30
Industrial Production (m/m)
1.1% 0.5% 0.1% Dec 16 14:15

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