The AUD has powered higher overnight and this morning despite a further meltdown in metals and political turmoil as PM Gillard battles with rival Rudd over leadership of the governing Labor party.
The fight for the leadership of Australia’s Labor party has heated up overnight, as PM Gillard and the challenger Kevin Rudd were reportedly set to duke it out with a leadership ballot at 7 p.m . local time (0900 GMT). Not sure of the policy implications of this, and AUD crosses seem to be taking this in stride, to say the least given the ongoing meltdown in metals markets overnight, but let’s keep an eye on the political situation, which is easy to do at the Sydney Morning Herald website. The 0.9300/25 area is interesting in AUDUSD as a possible pivot zone for further consolidation. Nothing has changed big picture for the Aussie, with the outstanding short term question one of whether the speculative shorts have been over-aggressive.
Chart: AUDUSD
The rally will need to work well through the 0.9300/25 pivot zone (so far failed) and even up to 0.9500 to neutralize the weight of even the near term portion of the selling pressure, so bulls have a lot of heavy lifting to do to prove themselves. If the pair closes weakly in the near term, we may be set up for another test lower toward 0.9000.
Overnight, the Chinese money markets calmed a bit further, though the levels are still extraordinarily elevated relative to where they were before the first of the month. The equity market there failed to catch a follow-on bid after yesterday’s crazy plunge and recovery and attempts by the PBOC to shore up confidence. An interesting FTAlphaville post discusses the US EuroDollar market gyrations of late and whether an element of the volatility is there may have been triggered unintentionally by QE3 and the Chinese credit crunch. Interesting stuff.
Looking ahead
There is absolutely nothing of note on the economic calendar today, though we do have BoE, ECB and Fed officials out at various times all day (the key Fed official out speaking later this week is Jeremy Stein of the FOMC Board of Governors, as he has been tasked with determining whether Fed policy presents financial stability risks). The overnight calendar looks fairly quiet as well. The next data that looks interesting is tomorrow night’s Japanese inflation, employment and other data, as we look for signs whether Abenomics is succeeding or failing.
Still looking for EURUSD to eventually follow through lower even as the first attempt this morning has thus far failed. See my post from late yesterday on a number of drivers for EURUSD, including interest rate spreads and bank worries.
Economic Data Highlights
- Switzerland May UBS Consumption Indicator out at 1.46 vs. 1.43 in Apr.
- Germany Jul. GfK Consumer Confidence out at 6.8 vs. 6.5 expected and 6.5 in Jun.
- UK BoE’s David Miles to Speak (0800)
- UK BoE to publish Financial Stability Report (0930)
- Euro Zone ECB’s Asmussen to Speak (1215)
- US Q1 GDP revision (1230)
- US Fed’s Fisher and Lacker to Testify (1400)
- US Weekly DoE Crude Oil and Product Inventories (1430)
- Euro Zone ECB’s Mersch to Speak (1515)
- New Zealand May Trade Balance (2245)
- New Zealand Jun. ANZ Business Confidence (0100)