Intraday Market Thoughts

European Salvation Grow, AUD Jobs Upcoming

by Adam Button
Oct 12, 2011 23:45

Signs of progress in managing the European sovereign/bank crisis lifted risk appetite once again on Wednesday. AUD and NZD were the top performers while JPY and USD lagged. The upcoming session features Australian reports on employment and inflation expectations. 2 Premium trades hit all targets, 2 stopped out and 5 trades are activated and remain in progress.

The EUs Barrosso unveiled a plan to recapitalize banks, sending EUR/USD 200 pips higher to 1.3833. The euro gave back about 50 pips of gains after the FT reported some European banks will scale down operations via sales rather than raise new capital.

Separately, the AP reported from EU sources that the EFSF may be leveraged 5-to-1. Germanys finance minister said there is no way around Greek debt reduction and Reuters reported that the EU was discussing a 30-50% haircut.

USD/JPY finally arose from its comatose state, rising on rumours of an SNB-like peg. Given policymaker comments suggesting they prefer a long-term solution, we highly doubt this rumour. But the sharp run-up in global bond yields, particularly US 10 year yields played a major role in lifting yen crosses.

Ashrafs Premium trades saw all targets hit in EURUSD and ES, while being stopped out USDJPY and gold (by 2 pts). EURGBP, USDCAD, AUDCAD, silver and CL remain in progress. To have difect access to these trades and the key weekly EURUSD Chart, please click here sub01/access/?a=519 Subscribers click here

The S&P 500 surged early but pared gains, closing up 1% to 1207. Oil slipped while gold ended up at $1676, but down from an intraday high of $1692.

Some headlines following the FOMC minutes pointed to a heightened possibility of QE3 but the more important message was that QE4 would require an further downturn and risks of deflation. The consensus at the Fed continues to indicate a high threshold.

Asia-Pacific Preview

At 2130 GMT, the BusinessNZ PMI for Sept will be released. A reading below the 52.9 prior would be the fifth consecutive decline.

At midnight GMT, the TD Australian consumer inflation expectations report is due. There is no market consensus but the RBA would be pleased to see a decline from the 2.8% August reading. A fall to 2.5% would re-ignite talk of rate cuts.

The more important for Australia comes 30 minutes later with September employment. The consensus is for no change in the 5.3% unemployment rate with 10.1K jobs added. Recent indicators suggest some downside here and given the recent 700 pip AUD rally, the risks are skewed toward a decline.


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