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Global Market Update
The View from Australia

Craig Killaby March 13, 2019

Data/Speakers

 

> AU March Westpac Consumer Sentiment : -4.8% v. 4.3% prev.

> US January Core Durable Goods Orders & Durable Goods Orders : -0.1% & 0.4% v. 0.1% & -0.5% exp.

> US February PPI & Core PPI : 0.1% & 0.1% v. 0.2% & 0.2% exp.

> US EIA Crude Oil Inventories : -3.9M v. 2.7M exp.

 

Overnight Headlines (BBG)

 

>  Britain’s Parliament voted to avoid an economically disastrous no-deal split from the European Union, opening the door to delaying Brexit and radically re -writing the terms of the divorce.

>  Oil prices climbed to their highest this year as a decline in U.S. crude and fuel stockpiles added to evidence of a tightening market.

 

What you need to know

 

Focus continues to be on overseas markets for risk appetite, all while the AU data continues to print with a concerning downward trend. First up yesterday was the WBC consumer sentiment figures, and it showed that sentiment has dropped substantially m/m and it is likely due to the poor data run including the soft GDP figure. The AUD was sold in the immediate aftermath of the report, however it was able to recover moderately throughout the session. The major news of the day came from the UK, as they showed some sense in voting on an amendment that will ensure that the UK will only leave the EU if they get a deal, thus removing the possibility of an economic disaster that would come with a no-deal Brexit. The move paves the way for another vote this evening, and this will be to extend the deadline of Article 50 and will be one of the most pivotal in recent memory. Optimism flooded into the GBP following the vote, seeing the GBPUSD surge over 2% and putting pressure on the Dollar. The Dollar was down against all of the majors, with commodity based currencies such as the AUD,NZD and CAD getting an extra boost as commodity prices bounced. US data was mixed, with producer inflation coming in below expectations while durable goods was better in January. Trump put a dent in risk appetite as his administration decided to ban the Boeing 737 Max 8 planes from coming in our leaving US airspace. Despite the news, the S&P500 was able to close the day in the black finishing up 0.7%. UST yields rising, with the 10y yields leading the push higher up 2bp. As mentioned, strong day on commodity markets with WTI crude surging over 2% as the EIA stocks contracted w/w. Iron ore also pushing higher, up 1.2% and Gold adding to the push, up 0.7%.

 

The Day Ahead

 

Data

 

> AU February MI Inflation Expectations : 3.7% prev.

> CN February Fixed Asset Investment & Industrial Production : 6.1% & 5.5% exp.

> CN February Retail Sales : 8.1% exp.

> US February Import Prices : 0.3% exp.

> US Unemployment Claims

> UK Parliament Brexit Vote – To postpone triggering Article 50

 

It looks as though the AUD is going to get some more benefit of last night’s risk on move, with the 0.7100 figure in the currency’s sights in early trade. Today we have some more tier two inflation numbers. China’s data dump will include numbers from the industrial production and retail sector, with fixed asset investment also included. With the Lunar New Year in February, expect these numbers to be skewed and market reaction minimized. Another key Brexit vote tonight in the UK, with all signs pointing to an extension of the Brexit deadline. Expect a huge downside risk-off move if the UK decides to reject, however this is very unlikely. Responses from the EU will be watched closely as the ball is back in their court as the UK searches for another deal.

 

Range for the day : 0.7070 – 0.7125

 

AUD/USD Technicals

 

After breaking through the 10SMA will relative ease, the pair eyes the psychological 0.7100 handle before the 55SMA at 0.7126. If a bullish run is able to be sustained, it will need to hold above 0.7100 to close the session, leaving the major target of 0.7160 the major obstacle. For support, nothing has really changed with the 0.7068 cloud bottom holding the currency up for the time being. A significant shift in sentiment may see the 0.7000 handle vulnerable, however signals point to a push higher.

 

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