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Westpac Morning Currency Thoughts

Contributor:
Fuseworks Media
Fuseworks Media
Westpac Morning Currency Thoughts

Risk markets rallied on speculation (later confirmed) that the EU has agreed a support plan. A think-tank report suggested a deal would be agreed over the weekend, and that was enough to dominate the earlier two-notch downgrade of Greece by Fitch to BBB-. US wholesale inventories' positive surprise also assisted.

The S&P500 closed up 0.7% to a fresh 12-month high, and the Dow Jones Industrial poked its head above 11,000. On Sunday, Eurozone finance ministers did agree on some terms of any bailout, such as providing as much as EUR30b at around 5% interest rate for 3yrs, which is below market.

The CRB commodities index is 0.3% higher, although oil suffered (-0.6%) on supply concerns. Gold rose 1.0% to a December high. The Greece speculation initially pushed US 10yr treasury yields 5bp higher, but they later returned to 3.88% for little net change.

The US dollar fell from 81.60 to below 80.90 amid the improved risk sentiment. EUR rallied from a European low of 1.3366 to 1.3574, and opened this morning in NZ higher on the Sunday news at 1.3585, currently at 1.3630. USD/JPY fell from 93.70 to 93.00.

AUD gained steadily throughout the evening from around 0.9300 to 0.9346, but has gapped higher this morning to 0.9380. NZD was the top performer during the 24hrs to Friday's close, reaching 0.7175. AUD/NZD fell back to 1.3017.

AUD/USD and NZD/USD outlook next 24 hours: The EUR should run higher, and take risk currencies with it. AUD should be well supported at 0.9300 for a run though 0.9400. NZD finally broke above 0.7100, and once it clears 0.7180 resistance, should attempt 0.7250 (October channel top).

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