Key News
* Euro gains on positive manufacturing data (AFP)
* Greenspan Says US Growth of 2.5% Is Possible in Third Quarter (Bloomberg)
* Tight credit could limit eurozone growth: analysts (AFP)
* Russian manufacturing industry shrank at slowest pace since September
(Bloomberg)
The Event Agenda
The Morning Run-Down
Better than expected manufacturing data in the Eurozone, China and the U.S. this morning set off a bid in nearly all currencies against the dollar. Add to that, positive commentary over the weekend about prospects for recovery from Greenspan, Geithner and Summers …and you get another risk-loving jolt higher in financial markets.
The activity this morning continues the sharp move in currencies from Friday. After better U.S. GDP on Friday morning, market participants put a square focus on currencies and ran the pound and the Aussie dollar through critical resistance (the 2009 highs).
Here’s a screenshot at Friday’s close…
While stocks have been leading the move in this highly correlated risk trade, on Friday stocks took a breather, and market focus turned squarely to currencies and commodities. But one market clouded the picture. Treasuries (10-yr notes) moved higher (see row 5).
The safety correlation between gold and the dollar broke down in May and has returned to its traditional inverse relationship. Thus the dollar moved lower, so gold moved higher. Considering the confluence of market performance, a move lower in Treasuries on Friday might have given the clue that the market was going after the dollar. But that wasn’t the case.
However, 10-year notes (Treasuries) have fully reversed the move now, and today, across all markets, it’s clear that it’s a risk appetite thing. And all things are pointing toward a higher risk trade. The close today will be important for currencies. The dollar index is trading into December lows. And the Australian dollar (the outperformer among currencies on this ride up) is trading into the 61.8% retracement of the move down from the July 2008 highs to the October lows…a 39% collapse, now met with a 40% climb.
With the docket set with rate decisions this week from Australia, Europe and the UK, the market is obviously positioning for positive language on the economy from central banks, hawkish sentiment from the RBA and clues on exit plans from the ECB and BOE.
And then we get employment data in the U.S. on Friday.
Related posts:
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- Morning Run…June 3, 2009 Key News *Australia Shares End Up 1.6% On Strong...
- Morning Run … August 31, 2009 Key News * India’s Growth Accelerates for First Time...
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