Investors take their foot off the pedal

Friday 19 October 2012

Investors take their foot off the pedal

By Tim Waterer (Senior Trader, CMC Markets)

Having avoided any scares on the Chinese data front and having witnessed signs of life among the bevy of US macro indicators, there has been an air of confidence on display this week which has seen traditionally defensive assets take a back seat.

In the past several days we have seen trading conditions conducive to higher yielding assets, however investors may just be raising their guard a fraction as we await news from the EU summit. Whilst these summits have a long and storied history of not producing anything of great substance, traders will still be mindful of potential negativity sprouting from EU leaders at the lack of progress on the part of a Spanish bailout.

Having touched 1.04 in the session prior, the AUD was unable to make a foray above this level with traders waiting for further indicators that the market optimism on display will be sustained into next week. A degree of caution with the EU summit taking place has seen the AUD operate in a tight holding pattern today, with financial markets across Asia taking a breather to cap off the week. A move higher for the AUDUSD through 1.0420 may require a few more ‘risk-on’ sessions amongst US equities which would decrease the appeal of holding the defensive USD.

Investors took their foot off the pedal on the Australian sharemarket today after what has been quite a productive week for the local bourse. Strength in the Energy and Materials sectors served to counterbalance weakness among the Financials, with our market overcoming a sluggish start to the trading session. Just how long the ASX200 can extend its stay above the 4550 level will be largely dependent upon global economic indicators continuing to measure up and therefore not upsetting investor confidence.

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