Morning FX thoughts - 19 Dec '11

Markets were not convincingly risk-negative over the weekend, despite soft data and a collective attack on Europe by the major rating agencies.

Ten-year bond yields in the safe-havens of the US and Europe both ended the day lower at 1.85%, while spreads naturally widened in those countries where credit ratingswere put under threat.

Equity indices were down in Europe but made small gains in the US, while commodities were generally higher - crude oil fell slightly but nickel rose 3.7%, copper 2% and gold 1.3%.

NZD ended the session above 0.76, while AUD failed to maintain its initial push above parity. NZD/AUD rose to 0.7620.

NZD/USD and AUD/USD outlook next 24 hours: Thinning markets into the Christmas period are likely to leave currencies trading sideways. Event risk is much higher for NZD this week, with Westpac consumer confidence at 10am today, NBNZ business confidence this afternoon, and the September quarter balance of payments (Wed) and GDP (Thurs).

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