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Westpac Global Markets Strategy Group: Morning FX Thoughts - NZ Edition

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Fuseworks Media
Fuseworks Media
Westpac Global Markets Strategy Group: Morning FX Thoughts - NZ Edition

Sentiment rode high until late morning NY, when an abrupt reversal sent markets into the red for the day. The S&P500, which earlier made a 5 month fresh high, is currently down 0.5%. Much of the early gain was attributed to US corporate earnings which continued to positively surprise, EBay and McDonald's notable last night. Over 85% of S&P500 companies have so far beaten estimates. Financials (-1.4%) underperformed on concerns that banks will crystallise home loan losses in a fresh wave of foreclosures, as well as being forced to purchase their mortgage backed securities. Commodities turned in a similar manner to equities, the CRB index currently 1.2% lower. The larger falls were in oil (-2.9%) and silver (-3.1%). US 10yr treasury yields bucked the moves, adding 4bp to 2.552%. The Fed's Bullard said they would monitor data right up to the policy meeting on 3 November.

The US dollar firmed as equities fell (arguably it led), the index rising from 76.85 to 77.55. EUR extended early gains after strong German PMI data, but then followed the global theme and fell from 1.4050 to 1.3904. USD/JPY was confined to a narrow 81.00-81.35 range. AUD peaked with US equities at 0.9892 and fell to 0.9743 over the following few hours. NZD similarly fell from 0.7537 to 0.7435. AUD/NZD ground higher to 1.3140 before the global selloff sent it back to 1.3100.

AUD/USD and NZD/USD outlook next 24 hours: Australian export and import prices released today should be minor but supportive for the AUD which is expected to be bound by 0.9660 and 0.9890. NZD may test major support at 0.7430.

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