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Global Market Update
The View from Australia

Craig Killaby April 10, 2019



> AU April Westpac Consumer Sentiment : 1.9% v. -4.8% prev.

> UK February GDP : 0.2% v. 0.2% exp.

> UK February Manufacturing Production : 0.9% v. 0.2% exp.

> US March CPI & Core CPI : 0.4% & 0.1% v. 0.3% & 0.2% exp.

> EU ECB Rate Decision & Press Conference: 0.00% v. 0.00% exp.


Overnight Headlines (BBG)


>  FOMC minutes show benchmark U.S. rate could shift “in either direction”




What you need to know


Busy 24 hours in markets, and the AUD has come out on top and near the highest level since February. It all kicked off around mid-day in Asia as Ast. Gov Debelle’s comments on the economic data implied that the RBA does not seem to be in a rush to cut rates. Although the comments on the strength of the labour market and housing market concerns were not concrete, the market chose to remain optimistic that the benchmark rates will remain steady in Australia for the medium term. In Europe, the EU summit on the state of the UK’s exit was polarising as French President Macron seemed to be one of the only leaders very opposed to a longer extension of Article 50. In early trade this morning the EU has come through with and offer to the UK of a formal extension of Brexit until the 31st October with a review in June. Next up for the EU will be to discuss with the UK, and for the two to agree on the extension terms. GBPUSD was down slightly, although nothing significant. The ECB was also on the docket overnight, where Draghi kept policy unchanged following last month’s surprise dovish shift. Although the picture painted on the state of the European economy was bleak, commenting that the ECB is ready to shift their negative rate and loan policy to combat a continued slowdown.


EURUSD was hit on the comments, down 0.2% before recovering post US CPI and FOMC minutes. It was some more positives from the US/China trade spat overnight, as US Treasury Sec. Mnuchin stated that the two nations have agreed in principle on the mechanism of enforcement of the trade deal. The data in the US printed to the downside as concerns about lagging inflation came about again with core consumer inflation missing estimates in March. The Dollar was set up for a negative US session, leading into the Fed minutes printing first thing this morning in APAC. The minutes showed that the majority of the members agreed that the Fed’s benchmark rate should remain unchanged in 2019, while commenting that the target band could shift in either direction if the data changes. The Fed did not shut the door on rate hikes, however there are increasing political pressures to see the rate hike from December reversed.


DXY was down 0.5% from yesterday, with commodity based currencies performing well on the push higher in the price of WTI crude, which was up another 0.3%. AUD the best performing major, up over 0.6% with the AUD major crosses performing well across the board. US equity markets finished well, with the S&P500 up 0.35%. UST yields falling across the curve, with the 10y leading the charge down 3.6bp. Iron ore continues to push higher, up 0.6% yet again.


The Day Ahead




> AU March MI Inflation Expectations : 4.1% prev.

> CN March CPI & PPI : 2.3% & 0..4% exp.

> AU RBA Ast. Gov. Debelle to speak

> US March PPI & Core PPI : 0.3% & 0.2% exp.

> US Unemployment Claims

> US FOMC Members Clarida, Williams and Bullard to speak


With the AUD at the highest levels in quite some time, the sentiment seems to be setting up for a bullish run with the 0.7200 level in its sights. Today, it is Chinese inflation figures printing around mid-day, with a positive print here likely to give the AUD the push it needs to break higher. US Producer inflation the highlight overnight, with any sort of final agreement on the Brexit extension of October and trade talks also AUD positive. Range pointing to the upside yet again today.


Range for the day : 0.7130 – 0.7195


AUD/USD Technicals


The break and close a tick above the 100SMA was significant as expected for the AUD, with the next major obstacle on a bullish run being the 200SMA now sitting at 0.7196. The 100SMA at 0.7140 still propping up the pair. 0.7134, the cloud top on the daily chart the key level to watch on the downside with 0.7027 and 0.7003 still the major support.


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