Markets were moderately firmer overnight. Hope the ECB will intervene in the Eurozone bond markets remains the primary factor. A report that France’s President Hollande was pressuring both Spain and Italy to request official aid (in turn allowing the ECB to act) helped keep that hope alive. Otherwise, market-sensitive news was sparse, Bernanke’s speech sticking to the topic of “Economic Measurement”. European equities closed 1.1% higher while the S&P500 is currently up 0.6%. The CRB commodities index is up 0.4%, oil, copper and gold all up 0.6%. US 10yr treasury yields are unchanged at 1.56%.
The US dollar index (DXY) was modestly weaker overnight. EUR bounced from 1.2342 to 1.2430. USD/JPY fell from 78.50 to 78.15. AUD followed EUR higher, from 1.0537 to 1.0593 – a five-month high. NZD rose from 0.8163 to 0.8224 – a three-month high. A volcano erupted after a 150-year nap but it was in a sparsely populated area of the North Island and has caused only minor disruption to travel. AUD/NZD resumed its two-week old decline from 1.2920 to 1.2875.
No US data to report.
Euroland Sentix investor confidence slipped to a new three year low in Aug, edging down from –29.5 to –30.6. Slippage in current conditions outweighed an improvement in expectations. The survey was taken on Aug 2 to 4, when markets were swinging wildly in the aftermath of the ECB press conference.
German government “not worried” by ECB’s bond buying guidance, according to a spokesman for Chancellor Merkel.
Greek bailout progress of sorts. After nearly two weeks of meetings, the Greek government has agreed with the Troika of ECB, EU and IMF officials examining Greece’s compliance with the conditions of the bailout “on the need to strengthen policy efforts to achieve its objectives”. Talks will resume in September. So no indication that Greece will get the next bailout tranche that has been delayed from June, but they have not been told No yet either.
AUD and NZD Outlook: The RBA meets today but is widely expected to remain on hold. NZ wage costs will also be watched. Fed Chairman Bernanke speaks on financial education but there will be a Q&A session to attract market attention.
NZD/USD 1 day: Supported at 0.8182 for a push above 0.8224 today.
NZD/USD 1 month: 0.8000.
NZ 2yr swap yield 1 day: Opening today 1bp higher at 2.85%.
NZ 2yr swap yield 1 month: Towards 3.00% on ECB expectations.
AUD/USD 1 day: Supported at 1.0562 for a push above 1.0593 today.
AUD/USD 1 month: 1.0300.