XE Morning Update

It has been a bad night for risk currencies, with the Kiwi following the Aussie down. The AUD was sitting on the edge of a cliff, and slightly bad unemployment data, coming in higher at 5.3% made it wobble. The final catalyst to push it over was actually China cutting Interest rates by 0.1%. This did came in on expectations, but the Market may have been hoping for more. To my mind though, I think this is a emotive market at the moment, and the cut was read as confirmation that China is actually hurting. The AUD took out the lows, and is now trading against the USD at the worst rate in 11 years. To put that in perspective, that was when the iPhone 3gs had just been released, or 7 Australian Prime Ministers ago.

When you have such a big support level that is closely watched, around 0.6660 for the AUDUSD, as this breaks you have a lot of people selling, or exiting on Stop Losses. This can add further selling pressure, driving the rate down, and triggering even more Stop Losses. In an illiquid market, you can get very large moves on the back of this. There is always risk that the market can gap over the weekend and open sharply lower, but I would say that risk is elevated this weekend.

We have a lot of manufacturing data out of Europe tonight, and then the US tomorrow morning. I think if European data is poor, this will be clearly risk off. US data also coming in badly would exacerbate this. The interesting thing though is that even if US data were to come out positive, because of the back drop above, I do not think it would be seen as risk on. It would only highlight that the US is increasingly becoming the only game in town, further hurting the Kiwi.

Global equity markets are mixed, - Dow -0.72%, S&P 500 -0.68%, FTSE -0.16%, DAX -0.91%, CAC -0.80%, Nikkei +0.34%, Shanghai +1.84%

Gold prices are up again, extending 7 year highs, trading at $1,617 an ounce. WTI Crude Oil prices continue to grind up, gaining 1.0% to $53.88 a barrel