It was the usual flight to risk taking in a relatively light NY session. The news flow was nearly nonexistent with only some Fedspeak on the docket. The highlight was dovish commentary from the Fed's Yellen, who remains skeptical about the US recovery. She called the rebound ''tepid'' and noted ''slim'' odds for a return to robust consumer spending. This is in line with our base case scenario that the US consumer will remain in deleveraging mode and keep overall economic growth anemic.
US stocks managed to eke out gains despite the somber assessment. There's a saying that the market can remain irrational longer than one can remain liquid and that comes to mind when watching the price action of the last few weeks. The S&P added 0.6% to close just pennies from the 1050 level and making a new 2009 high along the way. The US dollar bore the brunt of the euphoria.
EUR/USD traded up from a session open near 1.4560/70 to close by the 1.4620 area. The pair has seen an extremely robust 97% correlation with US equities thus far in September and thus any relapse in risk would likely be detrimental here. The market finally gunned for option barrier resistance at 1.4650 but scurried back shortly after. We think US data this week has a very good chance of disappointing and eliciting a selloff in stocks, thus we would remain better sellers of EUR/USD rallies short-term.
Looking ahead to the Asia session, the highlight looks to be the RBA meeting minutes. It will be interesting to see if the bank notes any concern with regards to AUD strength and any such insinuation would undoubtedly be AUD/USD negative here. Stay tuned!
Upcoming Economic Data Releases (Asia Session) prior expected
- 9/14/2009 22:45 GMT NZ Manufacturing Activity 2Q -0.90% - -
- 9/14/2009 23:01 GMT UK RICS House Price Balance AUG -8.10% 0.00%
- 9/15/2009 1:30 GMT AU Dwelling Starts 2Q -4.00% 2.00%
- 9/15/2009 1:30 GMT AU Reserve Bank's Board September Minutes
- 9/15/2009 3:00 GMT NZ Foreign Holdings of New Zealand Government Bonds
