Okay, so a spokesman for Glenn Stevens says that his comment about the RBA Board having deliberated hard to leave rates unchanged was supposed to be a joke yesterday.
I don’t buy it – like his counterparts at the Fed who are doing an excellent job of communicating their Taper messages the RBA Governor is no neophyte, so I just don’t believe that he mis-stepped by making a joke. Rather I think that he knew exactly what he was doing and, just like he has done for months now and just like the RBA statement did on Tuesday, his remark was signalled as letting the market know that both rates are going lower and that he is hopeful the Aussie is going to follow.
Further, he is not talking about just above 90 cents either, with a low of 0.9037 reached overnight. That is now a full 15 cents off the high in April and by any stretch qualifies as a cascade over the waterfall. The question now of course is where will it stop?
I have had a target of 0.8916 for a week now but it is worth noting that the low 80 cent region has now come into view over a multi-week and month timeframe.
Having said that, although last night I put my toe in the water with an Aussie purchase, and even though I got stopped out on the run down to 0.9037, I believe there could be a little bounce before the eventual break of 90 cents.
Elsewhere the Euro and Pound rallied against the US dollar after early weakness, which makes absolutely no sense to me but it is what it is. The Euro sits at 1.3011, up from the low at 1.2922 yesterday and the GBP is at 1.5278. The Yen did as the Yen often does when instability rises and rallied against the US dollar after making a high around 100.80, which as you can see in the chart below, was right on an old trendline that was previously support for the rally and now forms resistance for this latest move.
I know some readers are very adept at charts while others are less so but in very simplistic terms as you can see above, it is often worth leaving old trendlines on your charts. Support is 98.50 and resistance 101.04 today.
Stocks in Asia were off yesterday which saw European Bourses open weaker before rallying, but the FTSE, DAX, CAC and Spanish stocks were all off more than 1% while stocks in Milan were only 0.54% lower. No doubt this was impacted by the unevenness of the Markit Services PMI’s for Europe and the fact that even though Germany got back above the 50 median line, it missed expectations by a wide margin. This gave US stocks a weak lead in along with the shortened holiday session and the slightly better than expected ADP employment survey and the jobless claims, which were released a day early because of the 4th of July holiday tonight.
The ADP survey showed private sector jobs were up 188,000 against 160,000 – which I guess is more than “slightly better” and perhaps, lets hope, this precurses a strong non-farm payrolls on Friday night. Jobless claims were down 2,000 to 343,000.
At the close the Dow was up 0.38% to 14,989, the Nasdaq was up 0.31% but the S&P 500 was up just 1 point to 1615. As discussed yesterday the S&P 500 is caught in a 1590-1620 box and a break either way is likely to be decisive. As ever, non-farm payrolls Friday will set the tone.
Crude spikes
The volatility in the Egyptian political situation, added to what we are seeing in Syria, pushed crude sharply higher in the past 24 hours – or at least that is the excuse that we see written everywhere. Then last night, the EIA released the latest stockpile stats for the US and we saw a huge draw of over 10 million barrels. At $101.08, crude is at its highest level since January 2012.
Gold rallied a little as well to $1247 oz and Copper is up 1.02%.
Data
There is a holiday in the US tonight for 4th of July, so it might be fairly thin today, but BoJ Governor Kuroda speaks and the ECB and BoE both have pending interest rate decisions.
Twitter: Greg McKenna