Next stop 63 cents?
A big week for risk: the S&P 500, commodities such as oil and silver, currencies such as the NZD, AUD, BRL, HUF, MXN – all up over 5%. So much for stressed banks and declining global output; the focus is clearly on improving – but generally still negative – business sentiment. A swing upward in the OECD leading indicator for April to be released Monday is likely to frank this mood change (and hence maybe kick risky assets higher again).
The big question is when – not if – this risk-buying momentum stalls. The global problems have not gone away but rather the extreme pessimism of early 2009 is dissipating. Rather than venture a guess as to when such a stall may occur, two milestones are noted here for now:
- a sustained change in sentiment will need to show in real economic measures soon, suggesting April industrial figures for China (Wed) and the US (Fri) will command greater attention than normal (see Calendar).
- and any AUD/USD rally is likely to stall around 80c, implying a NZD/USD cap for now around 63 cents.
