Market Drivers for January 2, 2014
GBP/USD rally stalls at 1.6600 as GBP comes in only in line 0.7%
AU NAB Business confidence improves pushing AUDUSD through 8800
Nikkei -0.17% Europe 0.95%
Europe and Asia:
AUD NAB Business Confidence 6 vs 6 prior
GBP UK GDP 0.7% vs. 0.7%
USD Durable Goods 8:30 AM
USD Consumer Sentiment 10:0 AM
Its been a seesaw night in the forex markets as major currencies went their own way with euro continuing to drift lower, USD/JPY rising through the 103.00 figure on better US yields and cable hitting a wall at the 1.6600 barrier after an in-line GDP report. Only the Aussie performed well against the greenback with the pair rising above the 8800 handle as NAB Business confidence survey showed a marked improvement in December.
The Australian dollar rose to a high of 8820 in late Asian and early European trade today after the NAB business confidence and conditions showed a rise to 6 from 5 prior with NAB noting that, “Confidence has remained surprisingly elevated following the post-election jump, and could potentially remain at these levels for longer than previously thought given that the conditions index has begun to respond. Nevertheless, the increasing slack in the labour market and limited signs of a turnaround in real activity indicators – in light of the looming declines in mining investment – suggests these improvements may be fleeting, although higher building approvals and recent signs of life in the retail sector are encouraging.”
The news produced a relief rally in the Aussie – which has been hammered relentlessly over the past several weeks – as chances of an immediate rate cut by the RBA receded in the wake of the data. The report showed that confidence was relatively even across multiple industries and mainland states, including wholesale which previously has shown a sensitivity towards the Australian dollar. It remains to be seen whether the RBA policy of jawboning the Aussie lower in order to rebalance the economy will work, but for now at least it appears that business conditions have stabilized and therefore Aussie may have found a near term bottom at the 8650 level.
Meanwhile in UK the GDP data recorded another strong showing rising 0.7% on quarter over quarter basis, but cable sold off on the news as the whisper number was 0.9%. The market now carries very high expectations for UK growth and had bid up sterling to a high of 1.6627 ahead of the report only to sell it down to 1,6540 in the wake of the release. Nevertheless the data shows a very respectable growth of 2.8% which should be some of the best in G-10 universe and cable will likely be supported on the news and may make another run towards 1.6600 later in the day.
In North American trade today the market will get a glimpse of the US Durable Goods orders and Consumer Confidence numbers, but the action in currencies will likely be dictated by the moves in US yields. Overnight US yields have firmed as some of the concerns over EM turmoil has subsided and that has helped push USD/JPY through the 103.00 figure. If US rates continue to rally into North American trade USD/JPY could push higher towards the 103.50 level while euro could test support at 1,3600 as the the day proceeds.