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Global Market Update
The View from Australia

Craig Killaby September 24, 2019

Data/Speakers

 

> JP September Flash Manufacturing PMI : 48.9 v. 49.5 exp.

> EU September German IFO Business Climate : 94.6 v. 94.5 exp.

> US CB Consumer Confidence : 125.1 v. 134.1 exp.

 

Overnight Headlines (BBG)

 

>  House Speaker Nancy Pelosi told House Democrats she will support a formal impeachment inquiry of Trump, according to two lawmakers

>  U.K. Prime Minister Boris Johnson vowed to deliver Brexit next month after the Supreme Court overturned his suspension of Parliament

 

What you need to know

 

A few things to go over across yesterday’s sessions, which saw the AUD finish back up towards the 0.6800 handle amidst some Dollar weakness. With a quiet docket on the APAC calendar it was news that China released waivers to Chinese companies allowing them to purchase US soybeans without being subject to the new tariffs. The sign was optimism on markets for progress on the elongated US/China trade fight and a rally in risk assets. AUDUSD rallied to a high of 0.6786 immediately on the release of the news, although settled to close. RBA Gov. Lowe spoke in the AU evening, with the tone being cautiously optimistic for the growth prospects in the next few quarters. With the markets seemingly locking in a cut from the Reserve Bank next month, the odds were pared back to 63% from 82% on the tone taken by the Governor.

 

In the UK, PM Boris Johnson is coming under pressure as grumblings of misleading the Queen have come to fruition and his move to suspend Parliament being overturned by the UK Supreme Court in a 11-0 landslide vote. The GBPUSD pared back the losses seen in on Monday’s session, back to approaching 1.2500. In the US, Trump was in the limelight with his speech to the United Nations. Trump commented on China, accusing them of breaking promises while also commenting on the new allegations on the phone call with the Ukrainian President. The big news of the session was the announcement by the House speaker that an impeachment inquiry will begin on the President. Market reaction was a flight to havens, with the S&P500 coming under pressure and down 0.8%. The Dollar was down 0.3% in DXY term. Mixed bag in commodities, with Gold up near 0.6% while Oil and Iron ore the biggest movers down 2.4% & 3.5% respectively.

 

The Day Ahead

 

Data

 

> NZ August Trade Balance : -1565M v. -1190M exp.

> NZ RBNZ Official Bank Rate Decision : 0.5% exp (no change)

> US FOMC Members Evans & George to speak

> US EIA Crude Oil Inventories : -0.5M exp.

 

First thing this morning we had some weak numbers from across the Tasman with the August NZ Trade figures missing the mark. Market reaction limited, however the Kiwis will be in focus today with the RBNZ on the cards. Although policy is expected to be unchanged at this meeting, dovish comments will be met with selling pressure. Geopolitical risks are the major story as we come into today’s session, with the impeachment proceedings likely dropping the probability of a trade deal if they come to fruition. Punters have shot up the probability of impeachment from 20% to over 40% following the events overnight. Fedspeak and EIA Oil stocks the highlight overnight.

 

Range for the day : 0.6770 – 0.6830

 

AUD/USD Technicals

 

Good signs for some bullish momentum with the pair now hovering around the 0.6800 handle. A break above the recent high of 0.6870 will be needed to test the 100DMA at 0.6888. While on the downside, the levels to watch will be yesterday’s low of 0.6765 and all the September 3 low of 0.6688.

 

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