15 Oct 2013
Session Recap: Too dangerous to be shorting risk assets?
FXstreet.com (Barcelona) - A sluggish start to the week quickly morph’s into a “too hot to handle” situation for the bears.
Monday’s risk rebound turns into Tuesday’s initial bullish bias
The start of the week on Sunday night and early Monday morning certainly put a scare into the bold bulls who carried their positions home with them over the weekend. By 18:00 GMT Monday, though, all of the losses that had occurred since Friday’s close had been eliminated as nervous bears had to throw in the towel and protect capital. Why? Because news headlines kept flowing in that stated the two bickering sides in Washington were nearing an agreement to end the government shutdown and raise the debt ceiling prior to the 10/17 deadline. It did not even matter that the potentially disruptive headlines came across late in the US session and into the Asian session indicating that a scheduled meeting between party leaders was being postponed until Tuesday morning in the US – the risk rally pressed on. “Risk on” has been the story since about 13:00 GMT Monday – and any risk bears that were playing at the beginning of the session had picked up their toys and gone home as the US session wore on later on Monday.
So, did the rally in risk assets persist into and throughout the Asian session? In general, the answer has been “yes”, but the results are anything but a clean sweep for the risk bulls. We are seeing continued strength in the Aussie Dollar thus far on Tuesday despite monthly meeting minutes that did anything but signal a clear hawkish attitude on the part of the RBA. We’re also seeing strength in the Canadian Dollar. However, we are seeing relative weakness in the euro ahead of an expected flurry of data – so it’s not a clean sweep for the “risk currencies” thus far on Tuesday.
Safety remains under pressure
In terms of the “safe harbor” currencies, the results have also been mixed – but generally indicative of a global “risk on” attitude. The Japanese Yen is showing little reaction to seemingly disappointing Industrial Production numbers that came out at 04:30 GMT. The problem for the Yen is that it was already under pressure going into the number as a reflection of the global giddiness. The Swiss Franc is also feeling the effects of the global shift out of safety and into risk. The US Dollar is the only “safe harbor” currency seeing some upside thus far Tuesday – but that cannot be a surprise given the softness in the euro and the flight out of the Yen.
Main headlines in Asia
Senate meeting postponed until Tuesday, markets keep pricing in a solution
Three possible outcomes on the debt ceiling - HSBC
Tremendous progress made, Reid says
AUD/USD reaches 0.9523 peaks on neutral RBA minutes
RBA minutes confirm neutral tone
Two further rate cuts by the RBA still required - Westpac
RBNZ’s Spencer says LVR expected to pressure Kiwi, lower rate expectations
Monday’s risk rebound turns into Tuesday’s initial bullish bias
The start of the week on Sunday night and early Monday morning certainly put a scare into the bold bulls who carried their positions home with them over the weekend. By 18:00 GMT Monday, though, all of the losses that had occurred since Friday’s close had been eliminated as nervous bears had to throw in the towel and protect capital. Why? Because news headlines kept flowing in that stated the two bickering sides in Washington were nearing an agreement to end the government shutdown and raise the debt ceiling prior to the 10/17 deadline. It did not even matter that the potentially disruptive headlines came across late in the US session and into the Asian session indicating that a scheduled meeting between party leaders was being postponed until Tuesday morning in the US – the risk rally pressed on. “Risk on” has been the story since about 13:00 GMT Monday – and any risk bears that were playing at the beginning of the session had picked up their toys and gone home as the US session wore on later on Monday.
So, did the rally in risk assets persist into and throughout the Asian session? In general, the answer has been “yes”, but the results are anything but a clean sweep for the risk bulls. We are seeing continued strength in the Aussie Dollar thus far on Tuesday despite monthly meeting minutes that did anything but signal a clear hawkish attitude on the part of the RBA. We’re also seeing strength in the Canadian Dollar. However, we are seeing relative weakness in the euro ahead of an expected flurry of data – so it’s not a clean sweep for the “risk currencies” thus far on Tuesday.
Safety remains under pressure
In terms of the “safe harbor” currencies, the results have also been mixed – but generally indicative of a global “risk on” attitude. The Japanese Yen is showing little reaction to seemingly disappointing Industrial Production numbers that came out at 04:30 GMT. The problem for the Yen is that it was already under pressure going into the number as a reflection of the global giddiness. The Swiss Franc is also feeling the effects of the global shift out of safety and into risk. The US Dollar is the only “safe harbor” currency seeing some upside thus far Tuesday – but that cannot be a surprise given the softness in the euro and the flight out of the Yen.
Main headlines in Asia
Senate meeting postponed until Tuesday, markets keep pricing in a solution
Three possible outcomes on the debt ceiling - HSBC
Tremendous progress made, Reid says
AUD/USD reaches 0.9523 peaks on neutral RBA minutes
RBA minutes confirm neutral tone
Two further rate cuts by the RBA still required - Westpac
RBNZ’s Spencer says LVR expected to pressure Kiwi, lower rate expectations