Market Drivers for September 10, 2014
Europe and Asia
AUD: Westpac Confidence -4.6% vs. 3.8%
EUR: French NFP 0.1% vs. 0.1%
EUR: French IP 0.2% vs. -0.4%
North America
CAD: Capacity Utilization Rate 8:30 AM
Massive liquidation moves in both cable and the Aussie took both pairs to fresh monthly lows today as demand for the US dollar continued unabated in Asian and early European dealing. The Aussie tumbled to a low of .9111 - a nearly 1% loss on the day on a variety of factors which included weak consumer confidence numbers and a report by Goldman Sachs that forecast downward pressure on iron ore prices.
Despite the fact that the Aussie remains one of the highest yielding currencies in the the G-10 universe, the pair came under heavy selling on speculation that the Fed may be willing to change its language toward a more hawkish posture at the FOMC meeting next week. Although US monetary policy makers are still a considerable distance from hiking rates, the prospect of such a move is beginning to tighten the spread between Australian and US bonds and helping to drive the unwind in the trade. Yields on the U.S. 10-Year have risen above the key 2.50% level, helping to boost the greenback.
The Aussie had now broken key support levels at .9250 and .9200 and a break below .9100 could set up a test of the seminal .9000 level over the near term. Tonight's AU employment data could be key for the currency with markets looking a rebound off the anemic numbers the period prior. The consensus view is for 15K new jobs but the data has missed its mark two out the last three reports suggesting that labor demand Down Under remains weak.
Meanwhile, cable continued to come under very heavy selling assault in morning London dealing as the pair dropped 100 points off its session highs. The the specter of Scottish independence is clearly weighing heavily on the unit as investors continue to panic about the possible split in the United Kingdom. A new MNI poll due to be released tomorrow suggests that the Yes vote has now garnered 53% of support, but the methodology of the poll is suspect. As many analysts have pointed out, the polls in UK are notoriously unreliable especially about such binary issues as independence with voters saying one thing but often doing the opposite in the privacy of the booth. The probability of a NO vote still remains at 70% with 2-5 odds across the board.
For now, sterling appears to have found buyers ahead of the 1.6050 level and the unit will likely see more bids should it slip towards 1.6000 as longer term bargain hunters appear, but the price action in the currency will remain volatile until the referendum issue is resolved.
In North America the economic calendar is once again barren with only Wholesale inventories on the docket. USD/JPY continues to trade well with the pair making a high of 106.80 in Asian trade before correcting slightly in Europe. Another bout of dollar buying could push it through the key 107.00 level as the day proceeds, but the pair is becoming overstretched on the buy side and may be due for a relief correction in the near term.