Market Brief

The mixed performance of Asian equities overnight has left our risk benchmarks of EURUSD and gold at virtually the same levels we saw yesterday morning (1.4725 and $1130 respectively), however there has been a notable outperformance from the high-yielding NZD and AUD after the latest RBNZ rate decision and outstanding Australian jobs data. At the RBNZ meeting, the OCR was left unchanged at 2.50% as expected, but there was a distinctly more hawkish tone to the statement – including the line that “if the economy continues to recover, conditions may support beginning to remove monetary stimulus around the middle of 2010”. This has been interpreted by the market as implying an earlier schedule for tightening monetary policy, and as such, NZDUSD rallied from 0.7120 levels to 0.7210 in the hour following the release; and demand has continued to drive the pair to 0.7274 highs this morning. Meanwhile the other major antipodean piece of news was Australia’s Unemployment Rate which shrank to 5.7% in November – down from last month’s 5.8% reading and 0.2% lower than analyst forecasts. The absolute change in employment also made for impressive reading; with 31.2k jobs added in November against estimates for just 5k. AUDUSD shot upwards from 0.9110 to highs of 0.9171; however a period of profit-taking towards the end of the Asian session has meant the gains have been pared to 0.9150 levels currently.

There is likely to be an equally eventful European session ahead with two further major central bank rate decisions due. First up will be the SNB who are likely to keep their 0.00%-0.75% band unchanged – however the markets will be more focused on whether there is any change in stance on the future of stimulus measures. In particular, it will be important to interpret the central bank’s assessment of the recent uptick in inflation in Dec that saw YoY CPI figures emerge from negative territory for the first time in 8 months. Without the imminent threat of deflation, policy makers may no longer feel the need to engage in currency intervention to weaken the CHF, thereby allowing the market to wholly dictate where USDCHF and EURCHF trade.

Next up will be the BoE who are also anticipated to hold rates steady at 0.50%; but here it seems that the risks will be almost entirely hinged on the fate of QE, and whether MPC members deem it necessary to expand – or conversely signal an end to – the current programme. GBPUSD currently lies in vulnerable territory around 1.6250 major support (and the neckline of a significant head-and-shoulders chart formation), so the effect of this meeting on GBP sentiment will be pivotal to the currency’s direction from here.

Amongst these events, the other releases of the day include CPI from Norway and Sweden, and later the US Trade Balance and claims data.

G10 Advancers and Decliners vs USD
 NZD0.89width=120
 AUD0.53width=71.4606741573034
width=4.04494382022472JPY-0.03 
width=9.43820224719101SEK-0.07 
width=10.7865168539326CHF-0.08 
width=12.1348314606742EUR-0.09 
width=13.4831460674157DKK-0.10 
width=18.876404494382CAD-0.14 
width=18.876404494382GBP-0.14 
width=39.1011235955056NOK-0.29 
Global IndexesCurrent Level% Change
Nikkei 225 Index9'862.82- 1.42
Hang Seng Index21'690.45- 0.24
Shanghai Index3'254.26+ 0.45
FTSE 100 Index5'203.89- 0.37
DAX Index5'647.84- 0.72
SMI Index6'351.71- 0.75
S&P future1'094.00- 0.15
 World Markets Current Level % Change
Gold1'127.82- 0.07
Silver17.36- 0.12
VIX22.66- 4.35
Crude wti70.92+ 0.35
USD Index76.02+ 0.09
 Todays Calender Estimates Previous Country / GMT
SNB Interest rate announcement, % Dec0.250.25CHF/08:30
CPI, % m/m (y/y) Nov-0.1(-0.7)0.3 (-1.5)SEK/08:30
CPI, % m/m (y/y) Nov0.2 (1.4)-0.2 (0.6)NOK/09:00
AMV unemployment rate, % Nov5.45.4SEK/09:00
BoE MPC Bank Rate decision, % Dec0.500.50GBP/12:00
Trade balance, bn $ Oct-36.5-36.8USD/13:30
Initial jobless claims, thous 5-Dec457455USD/13:30
Currency Tech

AUDUSD
R 2: 0.9320
R 1: 0.9190
CURRENT: 0.9140
S 1: 0.8945
S 2: 0.8905

USDCAD
R 2: 1.0750
R 1: 1.0670
CURRENT: 1.0560
S 1: 1.0485
S 2: 1.0435

EURJPY
R 2: 131.60
R 1: 130.70
CURRENT: 129.40
S 1: 129.00
S 2: 127.75

USDMXN
R 2: 13.090
R 1: 12.987
CURRENT: 12.896
S 1: 12.850
S 2: 12.710