US Data Continues to pose QE3 Questions

15.46 AEST, Wednesday 15 August 2012

US Data Continues to pose QE3 Questions
By Tim Waterer (Senior Trader, CMC Markets)

US economic data continues to raise questions over the need for Ben Bernanke to give the market what it longs for, that being QE3. The 0.8% rise in US Retails Sales by itself does not signify a turning of the corner for the US economy. However the rise of the US Dollar in response to the data shows a moderate positional change with traders who are now forced to picture the possibility of a world with no QE3 should labour market data go the same direction as Retail Sales.

In commodities markets, the coming to life of US Retail Sales numbers was interpreted as a positive event for oil which rose on the better looking demand prospects. However the gold price had to give way to the resurgent Greenback with the likelihood of QE3 looking perhaps just an even money bet now and not the odds on favourite which traders have long expected.

The AUD has recently given up the 1.05 handle on the renewed US Dollar strength. Selling across Asian equity markets today has kept the AUD pinned below 1.05, whilst a softer gold produce is also keeping a lid on the commodity bloc currencies today. If global equity markets maintain further weakness in the days ahead the AUDUSD rate will likely primarily operate in the 1.0430-1.0540 trading band with the broader market searching for new direction.

The question mark posed by the recent US data regarding the future of Federal Reserve stimulus has thrown a small spanner in the works of equity markets. With traders a little unsettled as to whether we can expect Central bank intervention in the US and Europe over the coming months, the global-growth sensitive mining stocks on our market took a turn lower today which weighed on the broader ASX200 index. It almost seems like we are in a state of limbo until we get word from the ECB or the FOMC over what measures they are likely to take if any, and this uncertainty is creating fairly mundane trading conditions. Meanwhile, tonight US core CPI data will be a key event from which the S&P500 may take its cues from.

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ENDS

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