5 October 2012

Friday wrap...

The markets have been fairly subdued in the first week of the last quarter. Whilst the week was full of key central bank news announcements, nothing provided a catalyst for any sharp movements as most action from global central banks has already been enacted. However, the surprise news announcements came from the Reserve Bank of Australia and their 25bps rate cut from 3.5% to 3.25%. This weighed heavily on the Australia Dollar and the Euro benefited due to the deleveraging in the cross rates such as EURAUD. It remains to be seen whether the follow through will continue and mainly depends on news coming from China. The next major news announcements were the US ADP (162k actual vs 145k expected) and ISM numbers (55.1 actual vs 53.2 expected) which both came out of positive. However, even though it is Non-Farm payroll week, the most important economic numbers of the year the market has focused their attention on the Fed's policy of more QE3. This along with a raft of public holidays in China and Germany are a few reasons of the low volatility this week. The Canadian Dollar also posted better Ivey PMI (60.4 actual vs 59.2 expected) which can be fairly volatile but led to an increased hawkish stance amongst traders; subsequently CAD rallied amongst its counterparts. USDCAD fell victim to this move as it fell 74 pips in US trading.

The main focus moving forward will be whether Spain requests a bailout before the end of the year. The opening to the last quarter of the year can be fairly quiet as macros reconsider and reallocate positions. Look for price action as a leading indicator as the market is currently dealing with a mixed economic climate.

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