Press Release – CMC Markets
The mood of financial markets has been more settled in recent days, with investors cheering both good and bad data from the US. We have seen a low US GDP print evoke a positive reaction on thoughts that it will reduce the need for early QE tapering. …Asian markets move ahead in leaps and bounds
By Tim Waterer (Senior Trader, CMC Markets)
The mood of financial markets has been more settled in recent days, with investors cheering both good and bad data from the US. We have seen a low US GDP print evoke a positive reaction on thoughts that it will reduce the need for early QE tapering. We have also seen solid US data such as consumer sentiment and new home sales numbers met with applause due to signs of life in the US economy.
Adding to the feel good vibe of the market lately has been what appears to be a concerted effort by Fed officials to talk down the prospects of imminent QE tapering. So with Fed officials telling the market what it wants to hear, we could be entering a phase where the market can put a positive spin on both good and bad economic indicators.
Asian markets today followed the enthusiastic lead from Wall Street with the major indices across the region going ahead in leaps and bounds. Earlier concerns over the US and China appear to have receded for the moment which allowed the major bourses to end what has been a volatile month with some buying conviction. However, Australian equities posted a more modest performance than that of neighbouring markets, with the ASX200 showing signs of running out of gas following bumper gains in the prior two trading days.
Month end position squaring created some downward price pressure on the Australian Dollar today with the currency also being hindered by further weakness in the gold price. After dipping to the session low of 0.9215 the AUDUSD mounted a move higher through the afternoon to break above 0.9250. There has been some self-reflection by the market in recent days as to whether the sell-off in reaction to Bernanke’s QE-tapering comments was overdone, and if this mood holds we may see some further unwinding of long US Dollar positions. This would be to the benefit of the AUD which could make a push for 0.9350. However, resource price instability may limit upside potential of commodity-linked currencies in the short term.