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Global Market Update
The View from Australia

Craig Killaby July 9, 2019



> AU June NAB Business Confidence : 2 v. 7 prev.

> CA June Housing Starts : 246K v. 209K exp.

> CA June Building Permits : -13.0% v. -10.0% exp.


Overnight Headlines (BBG)


>  Mexico President Andres Manuel Lopez Obrador nominated Deputy Minister Arturo Herrera to head country’s finance ministry after Urzua abruptly quit, sending the peso tumbling

>  Trump criticized India’s decision to impose higher tariffs on a slew of American goods, days before his trade officials are scheduled to start talks with their counterparts


What you need to know


Just when the Aussie looked poised to make a run above 0.7000 as the market readied for some aggressive easing the Non-Farm payrolls last Friday have started a string of events that have seen those odds dwindle. Focus was on local markets in the morning of the Asian session yesterday, with NAB’s business survey disappointing following last month’s post-election optimism as business confidence dropped from 7 to 2. It was a slow bleed out for the AUD following the print, drifting lower throughout the session and hitting an overnight low of 0.6921. In Europe, it was the UK that was in focus as a report on the retail sector showed a sharp drop from just a year ago and saw the GBP touch the lowest level in 2 years with GBP/USD touching a low of 1.2440. There was a risk off environment across markets following the shock resignation of Mexico’s finance minister, seeing the MXN fall over 2% from the news. The USD was up across the board, up near 0.15% in DXY terms. The AUD was the worst performer of the session down 0.65%, with all the crosses also moving in the wrong direction against the majors. US equity markets able to push up a touch as Fed rate cuts and restart of the US/China trade talks buoyed optimism. Mixed bag for commodity markets, with base metals down and oil up 1.5% ahead of tonight’s EIA figure.


The Day Ahead




> AU July Westpac Consumer Sentiment : -0.6% prev.

> CN June CPI & PPI : 2.7% & 0.3% exp.

> UK May GDP : 0.3% exp.

> UK May Manufacturing Production : 2.2% exp.

> CA BOC Monetary Policy Rate Decision & Statement : 1.75% exp. (no change)

> US Fed Chair Powell to testify – Semi-annual Monetary Policy Report

> US EIA Crude Oil Inventories : -1.1M prev.

> US FOMC Meeting Minutes – June Meeting


The market did not get what they were after from Powell’s opening remarks yesterday, however that is likely to change tonight as he begins his testimony in Washington. All eyes are on forward guidance from the Fed, and markets are hoping to get some insight during Powell’s two day testimony and the Fed minutes over the next 24 hours. There is also a policy decision from the Canadian Central Bank, however not expecting any moves here. Today, the highlight in Asia will come from China as their consumer/producer inflation numbers will be released around mid-day. A negative number here will likely put another dent in the AUD. However, expecting a slight rebound in the AUDUSD today, with a close above 0.6950 a good sign for another test of 0.7000.


Range for the day : 0.6920 – 0.6970


AUD/USD Technicals


The break of the 55day at 0.6957 was not a good sign, and the follow through continued for the AUDUSD bears for the remainder of the session. Support now seen at last nights low 0.6921, with 0.6909 and 0.6865 the levels to keep an eye on. The 100SMA, now sitting at 0.7025 will need to be broken to change the momentum with upside capped at the 0.7093 mark (200SMA).

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