News and views
US equity markets opened strongly on the Veteran’s Day bank holiday, making a new 2009 high in the first hour on the back of China’s bullish set of economic data releases. After that, prices reversed to leave the S&P500 up 0.4% currently. Commodities were slightly firmer and gold made a fresh alltime high at $1119. The US treasury market was closed. Moody’s downgraded Iceland from Baa1 to Baa3.
The US dollar made a fresh 2009 low around the London open, and bounced near the close, to be up 0.2% on the day. EUR gained to 1.5048 around noon London, before falling to 1.4960 at the close. GBP peaked at 1.6797 before the BOE’s inflation report left the door open for further quantitative easing, and BoE Governor King talked the currency down, sending Sterling to 1.6552. The yen was weaker after the Sydney close, from 89.29 to 90.04 against the dollar. Pegged currency CNY saw a trading range of 6.8235-6.8300 (compared to the usually miniscule 20 or so), the central bank talking of possible changes to the exchange rate mechanism.
AUD peaked at 0.9344 during the London morning, marking a fresh 2009 high, and then faded to 0.9272, this morning opening around 0.9290.
NZD was more lethargic, and looked soggy in a sideways range of 0.7380 to 0.7440. AUD/NZD ground slightly higher overnight from 1.2540 to 1.2574.
No US data. Veterans’ Day – some markets closed.
The Bank of England quarterly inflation report included upward revisions to growth and inflation, although at the end of the two year forecast horizon which is where the BoE “aims” policy at, the central projection for the CPI remains below the 2% target. That is on the basis of market interest rate expectations and £200bn of quantitative easing remaining in place. At the press conference the BoE Governor said that the policy committee still has an “open mind” about further quantitative easing, and acknowledged that the banking system was still impaired and this was preventing credit growth.
UK unemployment rises 13k in Oct. This was the smallest monthly rise since April last year in the benefit claimant count jobless measure. The separate household survey found jobs growth of 6k in Q3, compared to job shedding of 247k in Q2, and the first rise in jobs since a similar 6k gain in Q2 last year.
Outlook
AUD/USD and NZD/USD outlook today: Further gains in US equities and losses in the US dollar overnight suggest the bullish backdrop remains intact. Buy AUD on dips to 0.9250, while NZD should hold 0.7350, barring negative surprises from today’s Australia’s employment report and NZ’s retail sales release.
