jueves, 21 de julio de 2011

FX Market Commentary – July 2011

Despite moderate Euro strength overnight the appeal of the Aussie dollar remained subdued with price action capped in a tight range below 107.5 US cents. With US markets closed for Independence Day, a decline in market participants made for light volumes resulting in general risk-neutral environment which provided little impetus to resurrect the Aussie following yesterday's slide in the domestic session.

Late yesterday the Aussie came under pressure alongside the Euro after ratings agency Standard and Poor's warned an extension of debt maturities held by private investors - although voluntary - may still warrant a 'selective default' rating. The Euro recovered after briefly slipping back through US$1.45 levels yesterday and maintained a slow upward trajectory overnight despite S&P's warning. The forthcoming rates decision, which is expected to see the ECB increase rates to 1.5 percent, gave participants a welcome distraction from the threat of default. Nevertheless, one can expect this threat to rare up again given the shock waves it would send through global markets. The European Central Bank has said they will not accept Greek debt as collateral in the event of a default rating. According to an article in the financial times citing a senior official, the ECB will continue to accept Greek debt as collateral unless all three major ratings agencies declare Greece to be in default.


The primary risk event for the local unit today will be the RBA interest rate decision due for release at 14.30 AEST. Although the decision will almost certainly see the RBA remain on hold at 4.75 percent, the usual post decision conjecture should prove to induce movement on the local unit as participants look to clues into the RBA's next move. Nevertheless, with much of the RBA's lukewarm rates outlook well and truly priced in the market, we expect the primary directive for the Aussie dollar to remain at the mercy of global risk trends. Earlier today we have the trade balance for May and HSBC Chinese PMI (Services) due for release. At the time of writing the Aussie dollar is buying 107.4 US cents.

Source: http://www.ibtimes.com

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