Those that hedged their risk off over the weekend were rewarded this morning with solid gaps across many pairs following the breakdown in negotiations in the US. The Australian dollar gapped down more than 50 pips versus the Yen this morning to open at 92.62 Yen and only sits about 20 pips higher so far. The weekend saw the Yen gain against the majority of its traded peers as little ground was made to resolve the debt ceiling deadline. Markets will be much attuned to the open of US equity markets to gauge what level of risk for a partial default this week, with the IMF meeting giving voice to the concerns of other nations over the weekend.
With risk being taken off the table in early trade so far today it will be quite interesting how the reaction is to Australian home loans data which is expected to contract 2.1% this month. That data is then followed by Chinese CPI which markets are expecting to rise to 2.8% and will be closely watched after this weekend surprise softer trade balance print after export growth dropped. The Australian dollar was one a few currencies that lost ground against the Greenback as a result over the weekend, down 40 pips on the open whilst the Euro, Pound and Kiwi are all higher than Friday’s close.
Looking ahead this week we see CPI data from the UK, New Zealand, Canada and Europe giving us distinct view of contrasting inflation/deflation concerns across those countries. The Australia dollar will actively trade on the US debt ceiling dramas but tomorrows RBA minutes and Friday’s Chinese GDP data which is expected to push up to 7.8% will be central to longer term AUD trading.
Joel Murphy
www.pepperstone.com
Joel Murphy is a currency analyst and market commentator for Forex Broker Pepperstone and he regularly features on Sky Business News Australia. He has worked in both retail and institutional Forex for last 8 years and completed a Bachelor of Commerce and a Bachelor of Arts from Monash University
