Currency markets held inside familiar ranges overnight. AUD, NZD and EUR all firmed in early trade with risk appetite supported by earlier unsourced reports in the German press that the ECB was planning to set a cap on sovereign peripheral yields by pledging unlimited bond purchases. But the positive mood was short-lived - the Bundesbank once again criticised the ECB’s bond buying program and the ECB issued a statement that, “(it is), wrong to speculate on the shape of future ECB interventions”. EUR/USD fell from 1.2370 to lows just below 1.23 on the news while AUD and NZD both eased about 35pts off their highs in sympathy with EUR. Amid thin summer markets though there was little appetite to push currencies further and AUD, NZD and EUR all retraced much of their losses. EUR/USD is trading at 1.2345 into the NY close. AUD and NZD both rebounded as the session wore on, to 1.0454 and 0.8093 respectively.
The Eurostoxx index fell 1.7% from its overnight highs following the Bundesbank and ECB comments to end the day down 0.2%. Spanish 2yr yields were 55bp lower at one stage but finished down a lesser 18bp. US equity indices opened lower with the Dow Jones down 44pts at one stage but recovered to be down 11pts into the close.
US Chicago Fed national activity index rose from –0.34 to –0.13 in July. This “survey of surveys” indicates that the overall tone of July economic activity data (it is a compilation of 85 published statistics) was not as weak as it was back in June.
UK house prices fell 2.4% in Aug according to the Rightmove index of asking prices, for an annual pace of gain of 2.0% yr, the equal lowest since Feb.
AUD and NZD Outlook: The NZ calendar sees the Q3 RBNZ inflation expectations survey and immigration data for July. The RBA releases the minutes for their August meeting. Momentum in AUD appears to have turned lower but the pair should hold above 1.04 over the next 24hrs. NZD/USD should run into buyers into 0.8035.