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Global Market Update
The View from Australia

Craig Killaby August 12, 2019



> CN July New Loans : 1060B v. 1275B exp.

> US Federal Budget Balance : -119.7B v. -120.0B exp.


Overnight Headlines (BBG)


>  Investors dumped Argentina’s government debt on fears of a potential default after President Mauricio Macri got pummeled at the polls

>  The U.K. government doesn’t expect the European Union to shift its position on Brexit for at least a month, a person familiar said


What you need to know


It really was a session of risk aversion yesterday as the US/China trade spat continues to roll on while political populist changes happened yet again with Argentina overhauling their government at their primary elections. It was a fairly quiet day throughout Asia yesterday, with the AUD trading a touch below the 0.6800 handle for the majority of the session before sliding in Europe. Overnight it was fears of a debt default from Argentina as the incumbent leadership was beat heavily in the polls with money flowing into bond markets amidst a major dent in risk appetite. As per usual, the AUD did not perform well in the risk-off environment touching an intraday low of 0.6748 against the Buck.


There were some positive rumours for the GBP coming out of the UK as there have been whispers that some UK lawmakers are planning to put together a bill that would force the new PM Johnson to request a Brexit extension past October 31st. Europe is not expected to make a decision until at least September. Equity markets hit hard globally yesterday, as the debt fears jittered equities as the S&P500 and ASX both finished the day in the red. Mixed bag on commodity markets, with Gold continuing to rip higher as the trade angst continues. UST yields falling sharply across the curve, with major forecasters downgrading their yield expectations for the 2 and 10y yield on the prolonged trade disagreement and the Argentina news.


The Day Ahead




> AU RBA Ast Gov. Kent to speak

> AU NAB Business Confidence : 2 prev.

> UK July Average Earnings Index : 3.7% prev.

> UK July Claimant Count Change & Unemployment Rate : 42.0K & 3.8% exp.

> US July CPI & Core CPI : 0.3% & 0.2% exp.


Nothing really of note from the RBA Ast. Gov this morning, we can likely expect nothing new from any RBA speak until markets get some more data to chew on in this week’s employment report. UK jobs the highlight in Europe, however the main attraction will come from consumer inflation out of the US. The recent increase in the trade tensions have sent the Fed on a fast track to cut rates, any positive data may cause markets to halt some of those projections.


Range for the day : 0.6730 – 0.6780


AUD/USD Technicals


The lower highs for the pair is the real takeaway, as it now sits hovering around the 0.6750 level amidst the risk-off session. Support seen at the 0.6741 level, holding up the pair for the time being with the Aug 7th low of 0.6677 the next downside level to watch. Resistance seen at the Aug 2nd high of 0.6819 with the June low of 0.6832 likely keeping rallies in check.

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