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Global Market Update
The View from Australia

Craig Killaby July 11, 2019



> AU June MI Inflation Expectations : 3.2% v. 3.3% prev.

> AU May Home Loans : 0.0% v. -0.6% exp.

> US June CPI & Core CPI : 0.1% & 0.3% v. 0.0% & 0.2% exp.


Overnight Headlines (BBG)


>  Powell’s testimony led markets to start to price in more fed easing for the remainder of 2019


What you need to know


The struggle for the USD continued yesterday, with the Fed Chair Powell putting another slight dent in the Dollar after wrapping up his testimony last night in Washington. Looking at local AU data it was only tier two data in inflation expectations and home loans on the docket, with the latter coming in above market expectations of a drop in May. There was some optimism in the AUD, drifting higher throughout the session, albeit largely due to a Dollar selloff across the majors. Overnight in the US the data was positive for USD bulls, with both headline and core inflation coming in above expectations and adding to the argument of the Fed keeping rates higher. However, the words coming out of the Fed Chair’s mouth sang a different tune as he alluded to further accommodative policy in the coming months and markets shifts likely cut of 0.50% in the upcoming meetings. Initial market reaction came as markets removed some of the chance of a 0.50% cut at the end of the month, while increasing the chance of back to back cuts in July/August. Initial reaction was USD weakness, with commodity pairs performing the best with the AUD touching an overnight high of 0.6988. The Aussie was able to finish the day up 0.15% against the Buck, with all the crosses (except GBP) up on the day. Both local and US equity markets having a strong day, up 0.40% & 0.25% respectively. Not such a great day on the commodities front with Copper, Gold, Oil and Iron Ore all down on the day.


The Day Ahead




> NZ June Business NZ Manufacturing Index : 51.3 v. 50.2 prev.

> CN June Trade Balance (USD) : 45.2B exp.

> US June PPI & Core PPI : 0.1% & 0.2% exp.


Although most of the major news is out of the way, there is still some Chinese trade numbers to round out the week in what was an eventful one for the USD. US producer inflation numbers next up on the docket overnight, however not expecting too much movement unless it comes in very different to market expectations. As we come to do on Fridays in APAC, we have one eye on next week’s data which will shift the focus back over to AU with the RBA’s meeting minutes and the June employment report as the major AUD highlights. Expecting direction to come from the Chinese trade data at mid-day today, with a close above the 0.6980/88 a very good sign for AUD bulls.


Range for the day : 0.6950 – 0.6995


AUD/USD Technicals


Focus now shifts to the weekly close for the AUDUSD, if able to hold above the 55DMA (0.6956) for the week and even push up above the 10SMA (0.6988) the case for a bullish run towards 0.7020/30 becomes stronger. That 55DMA acting as first support, with the recent lows of 0.6911 the next level keeping the pair up.

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