The week ended on a bullish note despite the light news flow. German business confidence bounced, the Israel/Hamas ceasefire was not violated, and a Greek aid agreement appeared probable (Germany's Chancellor said a deal is possible without write-downs). The S&P500 posted a fifth consecutive daily gain (+1.3%) and is now back at levels prevailing a month ago. Commodities were also firmer, the CRB index up 0.5% (oil +0.8%, copper +0.9%, gold +1.4%). US 10yr treasury yields were relatively restrained, nudging 1bp higher to 1.69%. Eurozone yield movement was modest.
The US dollar index (DXY) is around 0.6% weaker. EUR accelerated higher during the London afternoon from 1.2890 to 1.2991, just shy of psychological round-number resistance. USD/JPY also firmed in London, from 82.06 to 82.49. AUD responded to the prevailing sentiment, rising from 1.0391 to 1.0471 – a 2 week high. NZD similarly rose from 0.8165 to 0.8251. AUD/NZD fell from 1.2740 to 1.2680. Speculative futures positioning as at last Tuesday showed EUR shorts extended, AUD longs extended, and NZD longs little changed.
Economic wrap
Canadian CPI steady at 1.2% yr in Oct, and the BoC core rate steady at 1.3% yr. Slower energy price gains offset property tax rises and high eating out costs.
German Ifo business climate index up 1.4 pts to 101.4 in Nov, reversing Oct's decline. Expectations posted their first rise since April, the current index rose for the first month since June. The index is still running at levels that in 2008 were consistent with recession. Other data showed German GDP growth confirmed at 0.2% in Q3, although the detail showed domestic demand growth flat after falling for three quarters.
UK mortgage approvals up from 31.5k to 33.0k in Oct, according to BBA data which cover almost 70% of the market.
Market outlook
NZD and AUD outlook: The local economic calendars are empty today, and the main global events to watch will be the reconvened meeting of EU finance ministers to decide on Greek funding and a resumption of US fiscal negotiations.
NZD/USD 1 day: Supported at 0.8170 for a break above Friday's 0.8251 which then targets 0.8310.
NZD/USD 1 month: Lower towards 0.8050, weighed down by NZ's Q3 data outturns (risks skewed downwards for GDP on 20 Dec).
NZ 2yr swap yield 1 day: Opening today up 1bp to 2.67%.
NZ 2yr swap yield 1 month: To 2.50% on weak Q3 data outturns.
AUD/USD 1 day: Supported at 1.0400 for a break above Friday's 1.0475 which then targets 1.0550 triangle resistance.
AUD/USD 1 month: Heading towards 1.0200, our economists expecting the RBA to cut by 25bp on 6 Dec.
IMOH, Patrick E.
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