Market Brief
Both the US and Asian session were relatively uneventful, as markets patiently wait for tonight’s FOMC meeting. However, the few minutes of excitement came on the back of the strong New Zealand GDP figures, which sent the USD tumbling. The EURUSD briefly spiked above 1.4840 before settling back down to the 1.4800 handle. The NZDUSD climbed to new yearly highs at 0.7313 on the stronger economic data. After a positive start, Asian regional indexes are now trading lower but European index futures are mixed and noncommittal. The gorilla in the room is clearly the FOMC meeting where we don’t expect the Fed to communicate a near term reversal in massively accommodating monetary policy, but it could extend asset purchasing program. Overall, should the Fed stay within market expectations (especially by steering away from comments on timetable for an exit strategy) we see the USD weakness to continue.
The big news overnight was the New Zealand Q2 GDP which printed +0.1%, beating analyst expectations of -0.2%. This positive economic data continued a string of good news from the domestic economy. We still expected the RNBZ to keep rates unchanged at 2.50% at the October meeting and through the Q2 2010.
The Norges Bank will announce its rate decision today and markets expect the central bank to hold them steady at 1.25%. The markets expect the decision will reinforce expectations that they will be one of (if not) the first G10 central banks to begin tightening. Money markets are currently fully priced for a 25bp hike by year-end, with some probability of an overall 50bp of tightening. The real risk to the NOK today is if the central bank is less hawkish than the market expects. But overall, we believe the NOK should continue to be well supported, as the Norges bank has been less vocal (than their commodity bloc peers) in regard to the tightening effects of a stronger NOK. Norway Unemployment printed better than expected at 3.0% vs. 3.1% expected.
In the UK, BoE minutes will grab the spot light. While markets widely expect a 9-0 vote for the policy rate decision from the latest BoE meeting, there is more uncertainty regarding the vote on the size of the QE program. At the August meeting, Mervyn King, David Miles and Tim Besley dissented in favor of a larger £200bn program and markets are expecting a 7-2 vote. We believe the sterling will remain weak before next months more important monetary policy meeting and the MPC to provide greater clarity into the direction of their QE program.
| Global Indexes | Current Level | % Change |
| Nikkei 225 Index | 10.370.54 | -0.7 |
| Hang Seng Index | 21,589.24 | -0.51 |
| FTSE 100 Index | 5,172.24 | 0.57 |
| DAX Index | 5,743.29 | 0.59 |
| SMI Index | 6,357.49 | 0.26 |
| S&P future | 1,069.80 | 0.23 |
| DJIA futures | 9,785.00 | 0.14 |
| World Markets | Current Level | % Change |
| Gold | 1,015.77 | 0.13 |
| Silver | 17.18 | 0.23 |
| VIX | 23.08 | -4.07 |
| Crude wti | 71.67 | -0.12 |
| USD Index | 76.05 | -0.09 |
| Todays Calender | Estimates | Previous | Country / GMT |
| Japan: Public holiday | -- | -- | -- |
| BoE MPC minutes, vote | Sep-00 | Sep-00 | GBP / 08.30 |
| Norges bank interest rate announcement, % Sep | 1.25 | 1.25 | NOK / 12.00 |
| FOMC interest rate announcement, % Sep | 0-0.25 | 0-0.25 | USD / 18.15 |
| New Zealand trade balance NZD bn Aug | -0.273 | -0.51 | NZD/ 22.45 |
Currency Tech
AUDUSD
R 2: 0.8943
R 1: 0.8815
CURRENT: 0.8756
S 1: 0.8590
S 2: 0.8530
EURJPY
R 2: 136.10
R 1: 135.49
CURRENT: 134.64
S 1: 133.40
S 2: 132.47
USDMXN
R 2: 13.545
R 1: 13.408
CURRENT: 13.345
S 1: 13.120
S 2: 13.139
- S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot
