News and views
In a thinner US session (Yom Kippur holiday saw equity volume down 20%) the S&P500 rebounded at the open and held the gains to close up 1.7%. There was little of substance to attribute the bounce to, the second-tier data releases – the Chicago and Dallas Fed surveys – underwhelming, apart from reported M&A transactions including Xerox, and later Abbott Laboratories. Oil took equities’ lead, and noted an Iranian missile test, to gain 1.4%. Most US treasuries were stable, preferring to wait for this week’s GDP and payrolls reports, although the 30yr rallied 4bp as inflation expectations were pared back.
Despite the equities bounce, currencies remained largely rangebound. EUR rebounded off its Sydney low of 1.4565 to 1.4680 by the NY afternoon, slipping back to 1.4600 near the close. GBP was also supported post- Sydney to 1.5924, but the recently completed daily head-and-shoulders warns of lower. After yesterday’s 2.5% Nikkei sell-off and official flip-flop on yen strength, USD/JPY settled in a slightly higher 89.20-89.80 range.
AUD continued to gain after Sydney’s close, reaching 0.8756, and settling back at 0.8700 this morning. An overnight article from influential journalist Terry McCrann prodded AU swap rates higher.
NZD dipped lower during London, to 0.7112, before bouncing to 0.7204, and settling this morning at 0.7160. AUD/NZD formed a bullish key reversal, the Sydney low of 1.1990 and NY high of 1.2171 spanning the three previous days’ ranges, and settling near the high.
US Dallas Fed factory index roses from –9.1 to –6.4 in Sep. Although pointing to a lesser pace of industrial decline, this regional Fed index has thus far failed to rise back into positive territory, unlike most of the other regional and national industrial surveys. Separately, the Chicago Fed national activity index, which is a composite index derived from over 80 previously published data series, slipped from –0.56 to –0.90 in August, though its trend remains firmly to the upside.
German CPI eases from 0.0% yr to –0.3% yr. This renewed foray into temporary deflation reflected weaker than expected fuel, food and some other prices although base effects will tend to push the annual rate higher in coming months.
UK house prices rise 0.2% in Sep. This was the fifth straight month that prices have not fallen on the property research firm Hometrack’s index, although prices are still down on an annual basis, by 5.6% yr.
Outlook
AUD/USD and NZD/USD outlook today: Last night’s equities bounce was not enough to neutralise the recent bearish technical signals, so that sideways ranging today in AUD/USD and NZD/USD is likely. More interesting is the near-term bullish outlook for AUD/NZD, and we favour buying on any dips to 1.2125 for a move to around 1.2300.
