FX : Risk assets took a breather last night after an impressive two weeks
Risk assets took a breather last night after an impressive two weeks. US data mostly beat consensus, the Empire manufacturing survey detail revealing good improvements in new orders and employment. Goldman Sachs’ earning beat estimates, but the stock was sold anyway – a sign informal expectations were too high. The S&P500 is little changed, but the financials’ index is down 1.6%. Oil futures broke above the key $75.50, gaining 3.1% on the day, helped by an unexpected decline in US gasoline stockpiles. US 10yr notes started paying attention to the better data, selling off by 5bp post-Sydney.
While the US dollar only consolidated near its low last night, a couple of currencies stood out. GBP rose 1.6% to 1.6300 against the USD, gaining also against all the majors. The BoE’s Fisher spoke of the efficacy of their asset purchases. USD/CAD formed a key reversal higher on little news apart from rumoured speculative flow. EUR ranged widely between 1.4840 and 1.4970, unchanged on the day, and perhaps dampened by Trichet’s comments the EUR was not created to be a global reserve currency. Yen was much weaker against the USD, falling to 90.78.
AUD closed the domestic session on a 0.9228 high, and consolidated above 0.9150 overnight, held up by yesterday’s RBA minutes.
NZD also consolidated between its 0.7487 high and 0.7410, the spectre of rising inflation supporting. AUD/NZD rose from 1.2300 to 1.2400.
US Fed regional manufacturing surveys for October were encouraging in the details. The New York index surged from 18.9 to 34.6 – the highest headline reading since May 2004 – with strong gains in new orders and shipments. Employment rose from -8.3 to 10.4 and average workweek rose from 5.9 to 20.8, with capital spending plans rose from 14.3 to 18.2. In contrast the Philly index dipped slightly from 14.1 to 11.5 in October, but the employees index rose slightly and capex intentions jumped from 0.8 to 8.5.
US CPI rose 0.2% in September on both the headline and core measures. Energy prices made a modest contribution (gasoline up 1%) and new car prices resumed their gains as the cash for clunkers scheme ended, but food (-0.1%) and shelter (flat) were subdued. Annual inflation picked up from -1.5% to -1.3% as last year’s oil price plunge continued to drop out of the equation – in fact crude oil rose above year-ago levels for the first time overnight.
US initial jobless claims fell 10k to 514k in the second week of October, extending the 32k drop in the previous week. The claims figures point to a continued moderated in the rate of decline in the monthly payrolls figures. Continuing claims fell 75k to 5,992k, though the decline in this measure will partly reflect people losing access to time-limited unemployment insurance.
Eurozone inflation was confirmed at -0.3% y/y in the final estimate for September. Prices were flat for the month, kept in check by a 1.2% fall in energy prices. Core inflation eased slightly to 1.2% y/y.
Outlook
AUD/USD and NZD/USD outlook today: AUD/USD is running higher, and any dips will likely stall at 0.9150. While chasing AUD/USD at these levels is not compelling, crosses such as AUD/JPY still have upside potential and is worth buying. Similarly, NZD/USD looks supported at 0.7360, but 0.7500 will be an obstacl
