[B]Recap[/B]
[ul]
[li] [B]Copper [/B]hit $3.34 lb overnight up 0.66% on the back of the much better than expected European GDP data but the Euro was unable to gain any ground as the Fed taper talk continues to resonate in markets even as the inflation data suggests pretty much no real price pressures.
[/li][li] Looking at the [B]data[/B] and the great and very welcome surprise was the pick up in French GDP of +0.3% (-0.1% expected), German GDP (+0.7% v 0.6% expected) and overall EU GDP which was +0.3% for the quarter. Clearly not strong per se but better than expected. In the US the PPI was flat for the month and printed 2.1% year on year.
[/li][li] On [B]Global FX[/B] markets it was a fairly quiet night with Euro (-0.02% @1.3258), Yen (USDJPY 98.10 -0.09%) hardly moving while the Aussie (0.9126) is up a little after finding support above the previous nights low in Asian trade yesterday. GBP was a bit stronger up after the MPC minutes and unemployment (7.8%) were released.
[/li][li] In the [B]US Stocks[/B] were off again as rates stayed elevated and concerns grow about the Taper. There is also a lot of talk about “The Hindenberg Omen” which you can find at BI here which is also weighing on sentiment in the US a little. At the close the Dow (-0.73% @15,338), Nasdaq (-0.42%) and S&P500 (-0.54% @1,685) were all lower while with the exception of the FTSE (-0.38) European stocks were all up between a quarter and half a percent.
[/li][li] US [B]10′s[/B] closed at 2.71%, Bunds at 1.83% and Gilts at 2.64%.
[/li][li] On [B]commodity [/B]markets as noted Dr Copper was stronger, Silver rose 2.09%, Gold was 1% higher at $1332 and Corn leapt 2.25% higher.
[/li][/ul]
On the data front today it is the Feast of the Assumption in much of Europe and Indian independance day but in New Zealand we get Business PMI, in Australia consumer inflation expectations and the RBA FX transactions which might be interesting for the first time in a while. Retail sales in Singapore and the UK are out along with US CPI, jobless claims, IP and the NYC Empire Manufacturing index and Philly Fed survey.
[B]The developed world is healing[/B]
Europe is in a bad way, it has been for a while now but there has been a little bit of data recently that suggests that things are on the up. Perhaps not in absolute terms but at the very least in response to expectations which is of itself a positive development.
The chart above is of the Citibank Economic Surprise index for the G10 economies, the BRIC’s and emerging markets more broadly. Now of course we know that the Russian Government downgraded the growth outlook a couple of nights back and we know that the other members of the BRIC area are themselves also under pressure.
The Citi Eco Surprise index is all about expectations and not absolute data outcomes – of course the absolute influences the print relative to expectations but what the above shows you is the under performance of the emerging world relative to the developed and in this relationship you see why the Aussie dollar has continued to underperform even though the big economies are doing better.
If our customers are in strife then by definition we are in strife too.
[B]Australian Dollar becalmed before the storm[/B]
I have started following a new approach to technical market analysis called iQuant on the Aussie Dollar, they do more than just the Aussie spending a lot of time on stocks but for me it is the Aussie that is of most interest.
I was talking to Adam there yesterday and he noted that if 0.9080 was to give way then the Aussie was a shot duck – my words not his.
You can see in the chart above that the Aussie did indeed find support around the 80 zone with a low of 79 just a pip above the low of the previous day. I was short from the high 90′s and gave the Aussie a chance to break down but when it didn’t I covered my shorts. For the moment this level of 0.9080 remains key and the catalyst for a solid topside break seems lacking at the moment while the US dollar is the beneficiary of the taper talk support it is getting.
I’ll probably be looking to sell at some point in the day to see where it wants to run to for the next day or so.
[B]US stocks are headed lower
[/B]
One of the reasons I’m bullish US dollar at the moment and gold as well, is because I reckon that stocks are due for a correction. You can see in the chart below a clear support zone – a mini box if you will, with a base around 1675. If stocks break, if this hindenberg omen is real or even half real or even just enough to get people to stop buying then we are in for a retracement and the US dollar and gold are going to be the clear winners once more.
Have a great day and good hunting
[B]- Greg McKenna, Vantage FX Analyst[/B]
NB: Please note all references to rates above are approximate and should not be used for trade reference
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