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Global Market Update
The View from Australia

Craig Killaby September 12, 2019



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

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

> US Unemployment Claims : 204K v. 215K exp.


Overnight Headlines (BBG)


>  Trump administration officials discussed offering a limited trade agreement to China that would delay and even roll back some U.S. tariffs for the first time in exchange for Chinese commitments on intellectual property and agricultural purchases, according to five people familiar with the matter

>  The ECB cut interest rates further below zero and revived bond purchases after President Mario Draghi overcame critics of his stimulus policies to make a final run at reflating the euro-area economy


What you need to know


The risk-on theme continues to be the driver across financial markets as measures of goodwill by both the US and China have driven the flight away from havens and boosted sentiment. The quiet week in APAC continued yesterday, however news that Trump has decided to delay the $US250bio in tariffs until mid-October (slated for the 1st) set the stage for a push higher in the Aussie. The pair got as high as 0.6887 during Asian trade, before drifting a touch lower ahead of the ECB decision in the evening. The ECB delivered on their stimulus, cutting their deposit rate by 10bps and more QE to come. However, Draghi’s speech in the press conference was not as dovish as anticipated and despite the EURUSD touching the yearly low of 1.0927 the pair rebounded to open higher that yesterday. The biggest news came around midnight AEST, when Trump mentioned that he is considering an interim trade deal with the Chinese. Although nothing concrete, the negotiations that are set for early October are looking to have a very positive lead in. Last night US consumer inflation posted at expectations, with Core a touch better. Not much market reaction on the news, with markets being driven by the trade news in the short/medium term. US equity markets closed the day up 0.3% with commodities mixed as Iron ore continues its rebound and oil down near 1.5%.


The Day Ahead




> NZ August Business NZ Manufacturing Index : 48.2 exp.

> CN Bank Holiday

> US August Core Retail Sales & Retail Sales : 0.1% & 0.2% exp.

> US September Prelim UoM Consumer Sentiment : 90.4 exp.


The AUD sentiment continues to be driven by the trade negotiations between the US/China, if these continue to move in the right direction then the Aussie will likely move higher. The reason that the AUDUSD isn’t higher is likely due to the fool me once mantra, as we have been to this stage in the US/China talks before and they have fallen over. Markets seem to be taking the cautiously optimistic approach rather than going all in. Quiet day today with China off on holidays, with US retail numbers and consumer sentiment to come as the data highlights to close the week.


Range for the day : 0.6840 – 0.6910


AUD/USD Technicals


Posting a high of 0.6895 yesterday shows that the 0.6900 level will be a tough one to crack, with concrete news from trade talks likely needed to push higher. The break of the 55DMA is a good sign for bullish momentum, with the 0.6911 (100DMA) the next major level. Support unchanged a touch over 0.6800.


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