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Risk currencies strong on China developments

Four key markets in focus today.

AUD/USD

The pair has enjoyed a steady recovery since bouncing off the 0.93 handle and continues to drifty higher in-line with other risk assets. It will be interesting to see how the AUD reacts to some of the comments from China’s third plenum. The easing of the one child policy, more acceptance of foreign investment along with tax/fiscal reforms are the highlights and we are likely to see a positive reaction to this. Out of China we also get October property prices data today along with Hong Kong’s unemployment rate. From a China property price perspective, it’s all about how reforms will affect sentiment. Risk currencies have opened strongly this morning and a continuation of risk strength could see AUD/USD push through Saturday’s high of 0.938 and test the 200-day moving average as well.

GBP/USD

The pound extended its gains after the BoE’s Weale said there has been an upturn in CPI expectations. This cemented some of the comments we had heard from Mark Carney last week and reinforced the idea that a rate cut is not far off. GBP/USD printed a high of 1.613 and looks set to test the top end of the recent range at 1.626.

Spot Gold

The dovish tone from Janet Yellen last week has certainly set the scene for a recovery. After having dropped significantly on fears that tapering is on the way, gold is regaining strength as traders bet on Yellen maintaining the QE program.  However, there is still a threat the metal will be sold into strength, particularly in the 1300 region. Any Fed-speak alluding towards tapering possibility in December could derail the gold recovery. Later today we have Fed member Rosengren and tomorrow we have Mr Dudley on the wires.

Arrium

ARI is set to post its September quarter output and also has its AGM today. The stock has enjoyed a stellar recovery recently and remains one of the better performers in the materials space. It is also benefitting from the strong recovery in iron ore prices and improved sentiment around China. Any positive commentary today could see ARI extend its recent gains today and break through highs in the $1.55 region.

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