Forex Exchange Morning Report


US equities closed on Friday little changed (S&P500 +0.1%), giving up early gains in the fi rst hour of trading. Solid earnings from Oracle (second largest software producer in the world) contributed to the early boost, a weak US consumer confi dence report and Irish sovereign credit concerns responsible fro the turnaround. The Irish Finance Minister and the IMF both quashed rumours sweeping the market the country may need to seek IMF assistance, while some former Portugese fi nance ministers opined their country was likely to. Government bond yields (10yr) for Ireland rose 26bp to a post-1997 high of 6.29%, and Portugal they rose 13bp, compared to a 5bp fall for Germany. Commodities were modestly higher, oil (-1.2%) a notable exception. US 10yr treasury yields were 2bp at the close



The US dollar index moved inversely with US equities, closing modestly fi rmer. EUR fell from an early session peak of 1.3159 to 1.3020. Safe-haven Swiss franc outperformed, USD/CHF falling from 1.0180 to 1.0070. USD/JPY consolidated between 85.65 and 85.90.



AUD peaked during early Europe at 0.9466 (a fresh high), closing near the low of 0.9354.



NZD similarly peaked at 0.7333 and closed at 0.7251. AUD/NZD drifted off the 1.2955 session peak to 1.2900.



US core CPI fl at in Aug. This is the fourth month of eight so far this year that the core CPI has been fl at or falling – further evidence that very accommodative monetary policy has thus far not aggravated infl ationary pressures. The headline rate rose 0.3% in Aug, mainly due to a 2.3% rise in the energy component; food prices were up just 0.1%. Annual infl ation is 1.1% yr headline and 0.9% yr core.



US UoM consumer sentiment index falls from 68.9 to 66.6 in the preliminary Sep report. The fall to the lowest level for the year so far was driven entirely by the outlook component; the current conditions index edged up marginally.



Euroland current account defi cit €3.8bn in Jul. With the trade balance now in defi cit too, current account defi cits are likely to persist for a while yet. Other data included a fl at producer price index in Germany in Aug, for a 3.2% yr annual pace (down from 3.7% yr in Jul, its fi rst decline since last year).