Market backpedals on EU news

15.35 AEDT, Wednesday 21 November 2012

Market backpedals on EU news

By Tim Waterer (Senior Trader, CMC Markets)

With several key issues remaining unresolved on the international stage, financial markets are taking on a stymied appearance. In the US, politicians are starting to say the right things but we do not appear to be on the doorstep of anything resembling a concrete solution just yet. In Europe, the path towards the next tranche of aid for Greece is not looking entirely smooth.

Indeed, the delay of a decision regarding aid to Greece sent the Euro lower during Asian trading hours with investors clearly feeling a little disheartened by the news that we could be waiting until Monday for an outcome. Once the news of a delay hit the market, the US Dollar attracted some fresh buying as a defensive play by traders which saw other currencies slip against the Greenback.

The Australian Dollar faded in the afternoon session on the delay from the EU on Greece aid. Earlier in the day the AUDUSD rate had been making progress back in the direction of 1.04 however the negative news from Europe had the AUD descending to 1.0350. The currency had been under some pressure in the last 24hrs following hints from the RBA that a further rate cut could be waiting in the wings late his year or early next year. The weakness in the Euro today also impacted the AUD, and this halted some earlier upward momentum.

The Australian sharemarket was trading in languid fashion for much of the day, however the ASX200 began to backpedal once news of a delay regarding a decision on Greek aid was announced. Weakness from the energy sector in light of an overnight fall in the price of oil was a theme throughout today, while the bellweather miners like BHP and RIO also exhibited weakness given the continued uncertainty of key events abroad. Tomorrow attention will turn to the latest PMI reading from China which will again create sensitivity from the Australian market.

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