This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Fed member Fisher was also on the wires suggesting he is concerned the Fed will be too late to raise rates and he was not too worried about a slight undershoot in inflation. This, along with slightly better US manufacturing data, contributed to the downward bias in equities. Europe was the hardest hit as peripheral bond yields rose, sending EUR/USD below $1.2500. This saw EUR/USD trade at its lowest since August 2012 and really opens the pair up for further near-term losses. Weakness for Europe came despite the ECB saying it had bought €3.1 billion of covered bonds last week. Additionally, ECB members seem to be starting to warm to sovereign QE. Traders are likely to continue looking for opportunities to sell EUR/USD and any strength is likely to be taken advantage of.
Nikkei to trade at six-year high
Japan will be the main event in Asia today as investors look to see if the strength and momentum from Friday’s trade can continue. The Nikkei was closed in observance of Culture Day yesterday but futures traded. We are currently calling the Nikkei up 5.8% at 17,360, its highest since 2007. USD/JPY topped ¥114.00 yesterday and remains one of the best performing FX pairs at the moment. It’ll be interesting to see if Japanese equities and USD/JPY can hold off some profit taking, which is likely in the near term.
RBA and ABS in focus
AUD/USD has also come under pressure in line with other risk currency pairs and lost the $0.8700 handle. This leaves the pair staring at October lows of $0.8643 heading into today’s RBA meeting. No change is expected from the meeting and, as usual, the statement will be watched for any change in language. Perhaps the ABS’ revised estimates for jobs for the period December 2013 to September 2014 will be more interesting. Following recent ‘controversial’ jobs data, it’ll be interesting to see what impact new methodology will have on the data. Additionally, we have retail sales and the trade balance due out at 11.30am AEDT.
Ahead of the local market open, we are calling the ASX 200 relatively flat. Resource names will remain in focus after drops in iron ore, oil, gold and thermal coal. With most of the bank results out of the way, it’ll be interesting to see where inspiration for the market will come from. The Melbourne Cup is also on today and this might result in reduced activity, as Victoria has a public holiday.