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Global Market Update
The View from Australia

Craig Killaby June 25, 2020



> NZ May Trade Balance : 1.25bio v. 1.27 bio exp.

> US May Core Durable Goods Orders & Durable Goods Orders : 4.0% & 15.8% v. 2.4% & 10.3% exp.

> US Q1 Final GDP : -5.0% v. -5.0% exp.

> US May Prelim Wholesale Inventories : -1.2% v. 0.4% exp.

> US Unemployment Claims : 1.48mio v. 1.32mio exp.


Overnight Headlines (BBG)


> A higher-than-expected number of Americans sought unemployment benefits for a second week

> Texas Governor Greg Abbott halted the phased reopening of the state’s economy


What you need to know


If one is looking for rational price action, this is not the market with headlines showing a record surge in COVID-19 cases stocks were still able to edge out gains to close the US day. The APAC session yesterday was relatively uneventful, with the lack of economic data and China on holiday it was a tight range for the AUD below the 0.6900 handle while the USD went on the front foot into the European session. The Aussie touched an intraday low of 0.6848 as the continued rise of virus cases in Victoria keeps downside risks in the forefront while the late US equity rally saw the pair hit a high of 0.6893.


In Europe, the ECB policy meeting accounts showed that there is some reservation amongst ECB members on the amount of stimulus to provide the European economy. The EURUSD was under pressure down as much as 0.5% intraday before paring back losses to finish the session largely unchanged. The US day was dominated by headlines that saw risk whipsaw as major states reported a record surge in COVID-19 cases as testing ramps up and unveils how much the virus as spread across the country. Also hitting the wires was another week of unemployment claims rising in the USA, with a second consecutive week of over 1mio new jobless claims showing that the speed of the recovery has hit a major speedbump. Early this morning, the Fed made the announcement that they will be halting banks from providing dividends for Q2 while share buybacks are off the table until September. Market reaction was muted, as investors bet that October will see a spike in both.


The reopening plan in Texas has been slowed, this following reports that Houston is nearly critical levels of hospitalisations before being refuted on a conference call with local hospital CEOs. It is tough to get a gauge of the true situation as conflicting agendas are dominating the narrative. US equity markets rallied on the conference call, seeing the S&P500 close up over 1.1%. It was a negative session in Asian equities, with the ASX200 down over 2% although looking to pare back those losses today. Iron Ore the laggard in commodities, down over 1% while WTI crude ignored demand fears up 2.8% and Gold & Copper up very slightly.


The Day Ahead




> JP June Tokyo Core CPI : 0.2% exp.

> EU May German Import Prices : 0.5% exp.

> US May Core PCE Price Index : 0.0% exp.

> US May Personal Spending : 8.9% exp.

> US May Revised UoM Consumer Sentiment : 79.1 exp.

> US May Revised UoM Inflation Expectations : 3.0% prev.


Another quiet day for the APAC region, with no economic data FX will be dominated by moves in equity markets as they lead the risk tone yet again. The headlines hitting the wire are very concerning, as the US keeps moving ahead despite the clear health risks hitting the population.


Local headlines on the case load in Victoria will be watched closely as school holidays kick off tomorrow. Risks that a sustained rise may close the NSW/VIC border are very real, with tourism and general consumer confidence the causalities. Holding risk into the weekend would take some gusto, especially with the headlines of late from the US and the world, clearly engulfed in a second COVID-19 wave.


Range for the day : 0.6820 – 0.6930


AUD/USD Technicals


Not anticipating a break of the recent range today, with the lighter volumes it is unlikely that 0.6977 or 0.6775 are on the table. The weekly close will be very important, with a selloff to finish the week signalling that bearish momentum is building as the risk appetite wanes on COVID-19 spikes.