Financial markets going through the motions

15.00 AEST, Monday 20 August 2012

Financial markets going through the motions
By Tim Waterer (Senior Trader, CMC Markets)

Lower volatility and narrower trading ranges suggest that traders are continuing to just go ‘through the motions’ in August, knowing full well that September will provide the real Litmus Test for financial markets when we find out what stimulus measures if any will be provided by the ECB and the FOMC.

In the interim, it is likely we are in store for more listless trading sessions this week as traders position for expected higher volatility next month. Having said that, there are a few items on the radar that will get the attention of investors this week, such as the latest Flash Manufacturing PMI from China and Germany due on Thursday. The FOMC minutes and US New Home Sales data will also be keenly observed with a view towards how likely forthcoming stimulus may be in the USA.

The Australian Dollar (AUD) is trading at the lower end of its recent trading range courtesy of some better US economic data giving rise to some Greenback strength. Domestic macro drivers for the AUD have been sparse of late and this is starting to catch up with the currency as it drifts closer to 1.04, having been unable to sustain a move past 1.06 after a few failed attempts during August. The Monetary Policy Meeting minutes due on Tuesday may cause a small stir however I expect the RBA will stick true to form and keep their options on rates very open.

The Australian sharemarket traded in quite lethargic fashion Monday, which was in contrast to the rampant run higher to end the previous week. Enthusiasm has been reined in a little given the lack of new market drivers to start the new week, which contributed to an indifferent sort of performance on the local bourse. A push towards 4400 on the ASX200 is on hold with investors awaiting a fresh reason to hit the ‘buy’ button.

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