Tuesday, December 4, 2012


The ISM manufacturing index fell into contractionary territory at 49.5 compared to 51.3 expected. It was the lowest reading since July 2009. Recent manufacturing data has been inconsistent so it may be premature to draw conclusions but the forward-looking new orders component also fell sharply to 50.3 from 54.2. Survey officials said Hurricane Sandy was a minimal factor, if anything.

Comments from the Feds Dudley, Bullard and Rosengren all suggested the Fed will add to its Treasury purchase program at the FOMC meeting next week. Rosengren indicated as much as $45B/month in additional Treasury and MBS buys while Bullard suggested closer to $25B/month.

The euro spiked in early US trading on a pair of headlines. 1) Credit Suisse told clients it would begin charging negative interest rates on CHF deposits, a move that was later followed by UBS. The euro quickly rallied 40 pips against the franc. 2) Headlines that Spain made a formal request for bank aid were misinterpreted as an ESM request.

EURUSD climbed as high as 1.3076 but sank back to 1.3050.
The market now turns to the RBA decision at 330 GMT. There has been a strong shift in sentiment toward a 25 bps cut with the OIS market pricing a 92% chance. Economists are less decisive with 9 of 28 in the Bloomberg survey calling for a hold at 3.25%.

Given the overwhelming implied probability, AUD traders may see better value in longs.

Disclaimer The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities. Visit Us www.deryworldscorp.web.id


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