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Westpac Global Markets Strategy Group: Morning Currency Thoughts

Fuseworks Media
Fuseworks Media
Westpac Global Markets Strategy Group: Morning Currency Thoughts

Risk sentiment was weaker during the US session, hurting US equities, risk currencies and depressing US treasury bond yields.

The S&P500 closed down 1.7% to form a bearish key week reversal. Better US data and continued earnings improvements were overshadowed by the potential elevation of the probe into Goldman Sachs to criminal status, its stock falling 9% and financials down 3.5%. Standard & Poor's downgraded Goldman stock to "sell" from "hold", the early NY news marking the start of the declines.

Meanwhile, the EU and IMF spent the weekend crafting a three year rescue package worth EUR110b in exchange for austerity measures, a deal at the high end of market expectations and EUR-supportive today.

Commodities were influenced more by the positive US data, the CRB index rising 0.9%. Equities influenced US 10yr treasuries which shed 7bp in yield, the 2-10yr curve flattening by 4bp.

The US dollar index turned upwards during the European afternoon to close little changed from the Sydney session.

EUR fluctuated between 1.3250 and 1.3350, and is trading at the upper end this morning. The yen firmed against the dollar, from 94.60 to 93.80, and is lower (93.60) at this morning's open. AUD left Sydney at around 0.9320 and declined to 0.9250, the US equities fall and concerns around the tax reforms affecting mining companies weighing on the commodity currency through to the NZ open (where it has traded down to 0.9215.

NZD followed suit after initially gaining to 0.7326, and is currently at 0.7251. AUD/NZD moved steadily down to 1.2700, where it opens in NZ today.

AUD/USD and NZD/USD outlook next 24 hours: AUD may suffer today from the weekend's tax news, but should find support in the 0.9130-50 area. NZD has sustained its clearance of 0.7200, and between there and 0.7250 offers good support for an eventual move to 0.7400.

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