Morning Note - USD weakness spurs Gold + Aussie Dollar

by James Gerrish 22 September 2010

**22/09/10  -  8.16am  -  by James Gerrish** 


The US Fed Reserve last night reiterated that it would step in and provide further stimulus if the US economy needed it but fell short of announcing any further measures at the current time. Unsurprisingly, the Federal Open Market Committee (FOMC) kept interest rates unchanged and rhetoric once again pointed to a sluggish recovery in the US. 

I think its fairly obvious that we're going to  see a slow recovery out of the States and more stimulus measures will be pushed out over time - the drop in the US Dollar overnight certainly supports this view. 
 

On the market overnight it was a fairly choppy session with buyers stepping in after the FOMC comments about further stimulus. This was short lived and selling stepped in towards  the close. The DOW JONES added +7 points or +0.07% to 10761. Tech shares were the standout while Banking stocks were the weakest link. In the UK, the FTSE 100 lost -26 points or -0.47% to close at 5576 - the index closed on its lows after being higher on the session. From a technical sense, both the FTSE and the DOW JONES looked bearish overnight and some caution should be taken in the market today. 

Locally, SPI Futures were matching down 9 points suggesting a lower open this morning.

Gold continues to be in favour and its quite a rare event to see Gold continuing to rise in line with equities. Gold is currently a USD story and I think that a weaker USD overtime (based on continued stimulus and high debt) will be very supportive of the Gold price. We initially thought that Gold may take a break last week but it powered through the historical high and is now trading at $1289. 
 


Locally, the RBA released the minutes from its last board meeting and we now anticipate a pre-christmas hike. If it does come, no one can claim that the RBA hasn't given adequate warning. On Monday, I forwarded the recent speech from the RBA Assistant Governor Phillip Lowe - it was bullish to say the least. This was further supported by Glenn Stevens in a speech on Monday saying that "if the downside possibilities do not materialise, the task ahead is likely to be one of managing a fairly robust upswing". This will obviously involve tightening in monetary policy. The is supportive of higher levels in the AUSSIE DOLLAR
 

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

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