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Global Market Update
The View from Australia

Craig Killaby September 17, 2019



> AU Q2 HPI : -0.7% v. -1.0% exp.

> EU September German ZEW Economic Sentiment : -22.5 v. -38.0 exp.

> CA July Manufacturing Sales : -1.3% v. -0.3% exp.

> US August Industrial Production : 0.6% v. 0.2% exp.


Overnight Headlines (BBG)


>  Saudi Arabia partially restores output at damaged oil plant

>  The Reserve Bank of Australia said wages growth appears to have stalled and the job market is set to moderate


What you need to know


It was gearing up to be a poor day for the Aussie following the minutes from the RBA’s September meeting, with dovish comments combined with a weaker than expected CNY fix only a few minutes prior sending the AUD lower to start the afternoon. Prior to the minutes, the PBOC fixed the Yuan weaker than street estimates igniting a slide in the AUD prior to the RBA minutes. Concerns from the Reserve Bank around employment have raised eyebrows, as the cuts are not having the effect they anticipated on wages bringing the October cut probability up to 42% from 23% on Monday. The AUD touched an intraday low of 0.6831 just prior to the London open, however the weaker Dollar saved the currency from a likely move lower. The intervention from the Fed in overnight money markets the major story, as overnight lending rates shot up dramatically as a surprise USD shortage forced the Fed to add supply and signal that it will happen again tonight. Although this may just be a short term problem, actions from the Fed signals the acknowledgement of a problem and lack of control ahead of their rate decision tomorrow morning. The Dollar was hurt on the back of the actions, down 0.35% in DXY terms. Not a lot to report in terms of major FX moves, however the AUD crosses with EUR and GBP down on the session. US equity markets to edge out gains, up 0.25%. Oil was a hot topic yet again as news that the Saudis have restored nearly 70% of the output lost in the weekend’s attacks caused a significant pullback in the price. WTI crude dropped 5.2% after surging nearly 12% in the early portion of the week. Gold up 0.10%, while Copper and Iron Ore were down on the day.


The Day Ahead




> AU September MI Leading Index : 0.1% prev.

> UK August CPI : 1.8% exp.

> CA August CPI : -0.2% exp.

> US EIA Crude Oil Inventories : -2.1M exp.

> US FOMC Meeting minutes & FFR Decision : <2.00% exp. (0.25% cut)


It is likely to be the calm before the storm as significant moves very unlikely ahead of the Fed’s decision first thing tomorrow morning and a very busy economic calendar tomorrow. Consumer inflation numbers from the UK and Canada will be the highlight, with the Fed main event limiting moves. Expecting a tight range in APAC with no real data on tap, with the daily range wide to take into account the Fed at 4am AEST.


Range for the day : 0.6830 – 0.6910


AUD/USD Technicals


The 0.6865 level (55DMA) seems to be where the Aussie wants to be for the time being, with a break of 0.6900 needed to see any more upward momentum. Support around the 0.6831 handle (yesterday’s low) while 0.6801 and 0.6764 remain. If the break is going to happen, it is likely to come in the next 24 hours with Super Thursday on the docket tomorrow.


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