Morning Report: 08.15 London
- In the small hours of the morning, Australian interest rates were kept on hold as expected. “On hold” is an apt way to describe financial markets at the moment with with volatility lacking in the last couple of days.
- The stand out mover this morning is the British pound which is continuing to show relative weakness due to a potential debt downgrade and low growth. The GBP/JPY is down 0.22% with the GBP/USD down 0.21%.
- Away from the pound, the euro is also down slightly, though the dollar index is relatively unmoved this morning.
- Gold looks primed for a breakout, but there would need to be a sustained move on the dollar index in either direction.
- Coming up today we have Italian industrial production at 09.00 with a 1% drop expected. Italy is under focus again at 10.00, with GDP expected to drop by -0.7%.
- At 09.30 we have UK manufacturing production with a huge drop of -4% expected. UK NIESR GDP estimates are released at 15.00.
- At 11.00 German factory orders are released, with a drop of 0.9% expected.
- Canadian building permits are released at 13.30, with Ivey PMI released at 15.00.
- Fed chairman Bernanke speaks at 19.30.
- This morning the Reserve Bank of Australia elected to keep rates on hold. Australia has benefited by supplying the raw materials for China’s boom and as such, the Aussie dollar has been an out performer in recent years. While the euro crisis continues to rumble on, the AUD/USD quietly putting a decent run together. The AUD/USD has traditionally been a trend following currency, so with the the dollar index continuing to flash over bought, there could be room for further upside in the coming week.
- A good way to play this might be a HIGHER trade predicting that the AUD/USD is above 1.0600 in 7 days time for a potential return of 119%.