Market continues to face uncertainty
Announcement posted by de2 Communications 25 Sep 2015
“We saw some frenetic price action over the past 24 hours. This is a sure sign the hands of uncertainty are gripping financial markets,” said Stephen Innes, senior trader at FX/CFD firm OANDA Australia and Asia Pacific.
“After moving to a low of .6945 level, the Aussie dollar has bounced off the overnight lows and is perched just above the .7000 level in early Asia trade,”
Innes noted that the markets seem to be getting used to seeing the Aussie dollar bounce.
“We’ve seen good demand for Aussie after bouncing off the overnight lows as risk aversion activity came off the boil leading up to this morning speech by US Federal Reserve Chairwoman Janet Yellen.”
According to Innes, Yellen indicated in an earlier speech that an interest rate lift off is on the cards for 2015.
“My take on this is she wanted to emphasise the US economy is strong enough to support a rate hike regardless of external factor, perhaps a concept she failed to convey to the market FOMC day,”
“Although we’ve seen a small positive bounce in risk post Dr Yellen’s speech, I’m not sure there was enough in it to sooth investor confidence for an extended period. As such I anticipate Emerging Markets and China Economic pessimism to return to the fore,”
Innes noted that the Aussie is moving slightly higher post speech perhaps drawing support from positive risk overtones from Dr Yellen speech.
“However, recent price action on the commodity bloc currencies suggests traders will be looking at any Aussie uptick as an opportunity to add to shorts amid strong calls for the RBA interest rate cuts,” said Innes.
Over the pond ongoing economic weakness should put pressure on the Reserve Bank of New Zealand to further cut interest rates.
“Despite Fonterra raising its forecast for milk payout to 4.60 from 3.85 it’s not really a positive signal. The increase in payout is basically supply driven due to the industry-wide negative effects of El-Nino. Ongoing economic slack and the likelihood of more economic weakness should pressure the RBNZ to further cut interest rates,” added Innes.