IG Markets - Morning Thoughts

IG Markets - Morning Thoughts

US markets were mildly firmer as investors continued to exercise caution ahead of the FOMC meeting minutes and Fed Chief Ben Bernanke’s testimony on Thursday. Fed members continue to throw a spanner in the works, with some mixed comments about the future of QE. This is causing confusion among investors. On the wires overnight were Fed members Mr Bullard and Mr Dudley. Mr Bullard was quite dovish, highlighting that low inflation makes it hard to make a case for tapering off. Mr Dudley was a bit more on the fence, saying adjustments will have to be made should there be significant shifts in data, but he’s not quite sure which direction QE will take. Both of these comments were interpreted as dovish and resulted in mild USD selling, while US equities edged higher.

In the FX space, USD/JPY was quite choppy with an initial move to ¥102.89 greeted by selling which resulted in a fall to ¥102.26. It is a fairly big day ahead for the yen, with the BoJ set to hit the wires. This is likely to be the key event in Asia today and will have an impact on the whole risk space. With no policy change expected, traders will be looking for comments regarding efforts to stabilise the bond market. USD/JPY is currently sidelined at ¥102.51, and the ¥103.30 level, which was last week’s high, will be the level to look out for in the near term. Downside support is in the ¥102 region which was the low on Monday and Tuesday this week. AUD/USD has held up fairly well since the RBA’s monetary policy meeting minutes. The minutes were perhaps not as dovish as many expected, and judging by the recent drop in the AUD, the market might have been overly on the short side. A bit of squaring off along with a mildly weaker USD saw AUD/USD manage to print a high of $0.984 in US trade. There isn’t much on the local economic calendar today but we have Westpac consumer sentiment due out at 10.30 to look out for.

Ahead of the open, we are calling the ASX 200 up 0.1% at 5184. Yesterday we saw the market open a touch higher, but got sold off through the rest of the session. With only a mild gain predicted for the local market, we might see a similar situation again today, particularly after commodities mostly struggled. Iron ore bucked the trend though and managed to edge higher. BHP’s ADR is pointing to a 1.2% rise to 35.26 following some fairly hefty gains for BHP and RIO in the UK. There are a few annual general meetings to keep an eye on including Adelaide Brighton and Iluka. We also have Myer’s Q3 sales to focus on particularly as the recent rate cuts continue to filter through the system. At first glance it seems the headline sales missed estimates by around 1% CEO Brookes sounded a cautious outlook for retail trading. Near term support for MYR is in the $2.50 region. Mining services companies are likely to remain under pressure, particularly the ones that are yet to make any comments on earnings.

Market Price at 6:00am AEST Change Since Australian Market Close Percentage Change
AUD/USD 0.9809 -0.0022 -0.22%
USD/JPY 102.5050 -0.0400 -0.04%
ASX (cash) 5182 2 0.04%
US DOW (cash) 15375 33 0.21%
US S&P (cash) 1669.7 1.4 0.08%
UK FTSE (cash) 6795 48 0.71%
German DAX (cash) 8460 19 0.23%
Japan 225 (cash) 15464 83 0.54%
Rio Tinto Plc (London) 29.79 0.76 2.61%
BHP Billiton Plc (London) 19.82 0.57 2.97%
BHP Billiton Ltd. ADR (US) (AUD) 35.26 0.43 1.24%
US Light Crude Oil (June) 95.93 -0.95 -0.99%
Gold (spot) 1376.15 -20.6 -1.48%
Aluminium (London) 1856 -5 -0.26%
Copper (London) 7364 -21 -0.28%
Nickel (London) 15033 -50 -0.33%
Zinc (London) 1850 -2 -0.12%
Iron Ore 123.6 0.6 0.50%

IG Markets provides round-the-clock CFD trading on currencies, indices and commodities. The levels quoted in this email are the latest tradeable price for each market. The net change for each market is referenced from the corresponding tradeable level at yesterday’s close of the ASX. These levels are specifically tailored for the Australian trader and take into account the 24hr nature of global markets.

Please contact IG Markets if you require market commentary or the latest dealing price.

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