Boing! Hilsenrath and PBOC signal risk on – Aussie rips higher.

September 17, 2014

As a trader I really want this Hilsenrath bloke – who seems to be the mouth of the Fed – to be wrong dead wrong. Why? Because the notion that one journo in the whole world gets back grounded by the fed above all others is to me a disgrace and meddles with the interaction of markets and central bank governors.

If the Fed has something to say – then say it. If Hilsenrath is just a damn good guesser then we need him to get it wrong so he stops moving markets.

Anyway overnight the market voted for the status quo from the FOMC tomorrow morning based largely on Hilsenrath writing that the FOMC won’t change its language that rates will remain low for a “considerable period of time”. So the Commodity bloc currencies, which includes the Aussie, Kiwi and Loonie, rose in unison for the second day in a row and stocks on Wall Street pushed higher.

Westpac New Zealand Economist Imre Spritzer alernoted that “WSJ Fedwatcher Hilsenrath opined the FOMC would not change its key guidance language that rates would remain low for a “considerable period of time”. While Eamonn Sheriden from ForexLive told me that “The PBOC is injecting 500 billion yuan of liquidity into China’s biggest banks in a sign that while reform is a top priority, economic growth will not be allowed to slip too far. The injection should have an equivalent impact to around a 0.5% cut in the RRR.”

So the Aussie is higher at 0.9088 at the moment after rallying with its commodity cousins. USDJPY still looks like it is topping at 107.11 and the Euro is at 1.2957. Sterling had a volatile night moving around on rumours of polls on the outcome of the Scottish Independence referendum but it sits at 1.6270 this morning.

On the dailies and based on chart patterns all around the market there is every chance that the Aussie actually retests the 200 day moving average before reversing lower – we’ll see but the longer term bias remains down.

At the close the Dow was up 101 points to 17,132 for a gain of 0.59%, the Nasdaq rose 0.75% after the previous days fall finishing at 4,552 and the S&P 500 closed just short of 2,000 at 1,999 for a gain of 0.75% as well.

Looking at the data in the US producer prices were flat in August and up 0.1% when the volatile food and energy components were excluded. With no threat to inflation in the near term trades saw this as signal that the Fed can be cautious and the FOMC tomorrow will reflect that in the decision and statements. The Redbook index unexpectedly fell o.4% in September taking the year on year growth to 3.6% from 4.9%.

In Europe the collapse of the German ZEW current situation survey from 44 to 25.4 shows exactly why the OECD called for the ECB to get moving with QE. While EU sentiment tanked to 14.2 from 23.7 hope in Germany was even weaker with the sentiment index printing 6.9.

So at the close all the big European markets are lower. The FTSE fell 0.18% to 6,792, the DAX fell 0.28% to 9,633 and the CAC fell 4,409. In Milan and Madrid stocks were 0.30% and 0.39% respectively. No doubt Europe will play catchup this afternoon when markets open.

Locally the US rally saw ASX futures push sharply higher overnight with the September SPI 200 futures up 27 points to 5,468 with December up 26 points to 5,468.
That may not be THE bottom but yesterday’s price action suggests A bottom.

In Asia yesterday markets were off with the Nikkei down 0.23% to 15,912, the Hang Seng dipped 0.91% before the Typoon closed the market and Shanghai tanked 1.8% when the foreign investment numbers showed inbound investment to China fell 1.8%. The market lost 1.8% to 2,297.

On commodity markets iron ore pulled back 54 cents on teh September contract to $84.17 a tonne. September Newcastle coal rose just 5 cents to $66.20 a tonne.

Along with the commodity bloc rally (and general US dollar dip) Nymex crude rose $1.79 a barrel to $94.71. Gold rose a smidge to $1,236 and Copper roared 7 cents to $3.16 a pound. On the Ags wheat fell 0.72%, corn was flat and soybeans dipped 3.66%.

On the data front locally only the Westpac leading index is out in Australia before the BoE minutes and vote cut are announced tonight. EU CPI is going to be a big release as will the US CPI. The key release however is that FOMC decision which will be released tomorrow morning.

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