Scoreboard: Pretty penny

The Australian dollar was swept up in a global move against the greenback as strong data boosted anticipation of Fed tapering.

Probably the biggest news for domestic investors overnight was the Australian dollar which pushed decisively through 0.93 cents. Currently at 0.9331 as I write, the unit is about 45 pips higher than where it was at 1630 AEST yesterday and at its highest since mid-June.

There are plenty of domestic only reasons why the currency would push higher, but for last night it was part of a broader movement against the US dollar. For instance euro was up just over 60 pips to 1.3314, the British pound was a full figure higher at 1.5823, although the US dollar bought fewer yen compared to yesterday afternoon – 99.85 now compared to 100.2. Why the US dollar weakness? It’s partly due to a view that if the Federal Reserve starts the taper next week it’ll make it quite modest – or have a lengthy delay from that to the next. But it’s also the case that global economic data is looking good and not just in the US.

There wasn’t any major data out overnight but UK numbers did show a modest fall in the unemployment rate – to 7.7 per cent from 7.8 per cent, equalling around 80,000 jobs created. But it was good data which saw Sterling spike higher, and now the talk is that the next move by the Bank of England might even be up – although some policy committee members are expressing scepticism on the rebound to date. Anyway, that weaker US dollar encouraged a modest bid in the commodity space with gold up smalls ($1364), silver 0.8 per cent higher, copper up 0.4 per cent and crude 0.3 per cent higher ($107.7). Global equities also managed to push higher, if just in some cases, and in Europe we saw gains of 0.6 per cent on the Dax and 0.1 per cent on the CaC and FTSE100.

Over on Wall Street, gains were led by energy stocks and basic materials, while tech stocks weighed (dragged down by Apple which fell over 5 per cent following the launch of its new iPhone). Indeed the Nasdaq was down 0.1 per cent at the bell. In contrast the Dow put on 135 points (15,326) and the S&P500 was 0.3 per cent higher.

That’s largely it for the session – bond yields didn’t do much and the US 10-year yield was down a bps or two for the session (2.91 per cent) and news was otherwise light. One of the more interesting events was a bond issue by Verizon. They sold about $49 billion in notes which is the largest in corporate history, and received $101 billion.

Looking at the day ahead then, the SPI suggests Aussie stocks will be 0.3 per cent higher while the main data event will of course be the domestic labour figures. The data is for August and the market forecast is that 10,000 jobs were created after a fall of about the same magnitude last month. The unemployment rate is forecast to rise to 5.8 per cent. Other than the labour figures there isn’t much though. We see eurozone industrial production tonight, US jobless claims, the monthly budget and import prices.

That’s it, have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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