Daily Forex Snapshots

RBA Minutes Weigh On AUD

December 15, 2009 8:56 AM CET

G10 Advancers and Decliners vs USD

	CAD	0.16
	GBP	-0.05
	SEK	-0.20
	EUR	-0.21
	DKK	-0.24
	CHF	-0.25
	NZD	-0.34
	NOK	-0.45
	JPY	-0.46
	AUD	-0.57

Global Indexes

Current Level

% Change

Nikkei 225 Index	10'083.48	- 0.22
Hang Seng Index	21'812.01	- 1.24
Shanghai Index	3'274.46	- 0.86
FTSE 100 Index	5'315.34	+ 1.02
DAX Index	5'802.26	+ 0.80
SMI Index	6'433.09	+ 0.34
S&P future	1'113.40	+ 0.49

World Markets

Current Level

% Change

Gold	1'122.87	- 0.34
Silver	17.31	- 0.46
VIX	21.15	- 2.04
Crude wti	69.69	+ 0.26
USD Index	76.44	+ 0.11

Todays Calender

Estimates

Country / GMT

Industrial production, % q/q Q3	-0.1	2.7	CHF/08:15
CPI, % m/m (y/y) Nov	0.2 (1.8)	0.2 (1.5)	GBP/09:30
Germany: ZEW economic expectations index Dec	50.0	51.1	EUR/10:00
Producer price index, % m/m (y/y) Nov	0.8 (1.8)	0.3 (-1.9)	USD/13:30
Net long-term TIC flows, bn $ Oct	37.1	40.7	USD/14:00
Industrial production, % m/m Nov	0.5	0.1	USD/14:15
Capacity utilization, % Nov	71.1	70.7	USD/14:15

Currency Tech

AUDUSD
R 2: 0.9325
R 1: 0.9190
CURRENT: 0.9110
S 1: 0.9015
S 2: 0.8950

USDCAD
R 2: 1.0750
R 1: 1.0670
CURRENT: 1.0585
S 1: 1.0480
S 2: 1.0430

EURJPY
R 2: 132.70
R 1: 131.90
CURRENT: 130.25
S 1: 128.70
S 2: 126.90

USDMXN
R 2: 13.025
R 1: 12.955
CURRENT: 12.767
S 1: 12.728
S 2: 12.487

Market Brief

The USD is largely unchanged from yesterday – unsurprising given the lack of scheduled economic releases during the US session and absence of any market moving speakers or new headlines overnight. Equity markets across Asia are mixed; although the Nikkei, Hang Seng and Shanghai Composite are heading for a lower close. Most other benchmarks of risk are also stable with EURUSD still holding onto territory around 1.4650, and gold consolidating around $1125.

The major event of the overnight session was the release of the minutes of the December RBA meeting. Although the outcome of that rate decision was in line with the market’s expectation for a hike of 25bps to 3.75%, today’s minutes reveal that the consensus among RBA members was far less clear cut than many had assumed. The minutes acknowledged that the arguments for and against the hike were “finely balanced”, and made the assessment that the three hikes over the last three meetings had the effect of “materially shifting the stance of policy to a less accommodative setting”. Given the continuing improvements in the Australian economy (most recently demonstrated by the outstanding employment data), there is likely to be further scope for tightening to 4.25% in the first half of 2010, however this latest RBA release does perhaps hint that further hikes may not materialize at every consecutive meeting as they have done at the start of the cycle.

Looking ahead to today’s session, UK CPI is expected to rise 0.2% MoM in November, bringing the annual rate up to 1.8%. The BoE’s November Inflation Report has already braced markets for a sharp uptick in UK inflation in the short term, and as such we feel there is limited scope for GBP to rally on an upside surprise, especially considering the softer PPI figures delivered on Friday. Eurozone and German ZEW surveys due this morning are expected to decrease slightly from last month’s readings, but given the minimal impact that this report has had on FX markets in the last few months we would put little emphasis on this reading as a driver for EURUSD – unless of course there is an exceptional surprise either way (for example, of the magnitude and impact of the latest US non-farm payrolls and retail sales data).

The upcoming US session will include a number of US economic releases; including Producer Price Index, Net Long-Term TIC Flows, Industrial Production, and Capacity Utilization. This will be the first opportunity we have had since Friday to assess whether there is indeed a new relationship between the USD and investor sentiment about the US outlook. For most of this year, the FX reaction on good US data was to sell the USD, but after the surprise non-farm payrolls just over a week ago, and retail sales on Friday, we saw USD strength on significantly better than expected numbers. Today’s US data will hopefully clarify whether there is indeed a shift in the dynamic of the USD and risk appetite, but there is unlikely to be a significant break out in currency ranges as markets will be keeping one eye on the upcoming FOMC meeting tomorrow.

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