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Global Market Update
The View from Australia

Craig Killaby February 18, 2019

Data/Speakers

 

> JP December Core Machinery Orders : -0.1% v.  -1.1% exp.

 

Overnight Headlines (BBG)

 

>  The European Union is ready to retaliate with duties on $23 billion in U.S. goods should Trump follow through on his threat

to impose tariffs on imported vehicles

>  TRUMP SAYS U.S. MAKING A LOT OF PROGRESS IN CHINA TALKS

 

What you need to know

 

With the US off on their President’s Day holiday, it was a quiet day with US equity and bond markets shut for the day. Locally, the trade optimism from the US/China talks over the weekend reverberated across markets and dragged the AUD to the highest levels since early February at 0.7161. Next up for the AUD will be the RBA meeting minutes this morning at 11:30am AEDT, as investors will be eagerly awaiting to see how balanced those rate risks Lowe spoke about actually are. Overnight, Europe took centre stage with the US off and the EUR continued its push higher with the EU sending a warning shot to Trump that they will add some more duties on automobiles if Trump keeps the tariffs up. In the UK, it was the opposition Labour party that took some losses as seven MPs quit in the midst of the Brexit saga that is inching closer towards the deadline. Price action relatively muted with the US off, with the Dollar down slightly in DXY terms. The Aussie opens up little changed, although the crosses looking a touch weaker after the EUR and GBP gained against the Buck. Commodity markets getting a slight boost in the light volume session, with Base Metals up and Gold finishing 0.3% higher. WTI crude able to capitalize on the weaker greenback looking to string together some gains up 0.85%.

 

The Day Ahead

 

Data

 

> AU RBA Monetary Policy Meeting Minutes

> UK December Average Earnings Index & Claimant Count Change : 3.5% & 12.3K exp.

> UK December Unemployment Rate : 4.0% exp.

> February German ZEW Economic Sentiment : -14.1 exp.

 

The local data focus for the week starts this morning, with the RBA’s minutes likely to dictate the AUD’s direction for the week. If the minutes are more dovish than anticipated, we can likely see the market price in a higher chance of a cut with the reverse also true. If the minutes show that the risks are indeed balanced, and show that the next move for the RBA is up the AUD could get the momentum it needs to break above the 0.7200 handle. Overnight, German ZEW data and UK employment the highlights. Sideways trade until 11:30am this morning, setting the stage for the back half of the week for APAC.

 

Range for the day : 0.7090 – 0.7185

 

AUD/USD Technicals

 

Yesterday’s trade showed bullish momentum may be growing with the optimism from the US/China trade talks. Although opening up a touch lower this morning, the RBA minutes give AUD bulls the chance to drag the pair towards the 0.7200 handle. Still capping gains at 0.7275 sits the 200DMA, with a shift in sentiment (trade deal) likely needed for a break in the short term. Support seen at the recent lows below 0.7100, with last weeks 0.7072/54 propping the pair up from a drastic shift down below the January 4 low of 0.6994.

 

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