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Global Market Update
The View from Australia

Craig Killaby September 13, 2020

Data/Speakers

 

> NZ August Business Manufacturing Index : 50.7 v. 59.0 revised prev.

> EU August German Final CPI : -0.1% v. -0.1% exp.

> UK July Industrial Production : 5.2% v. 4.2% exp.

> UK July Manufacturing Production : 6.3% v. 5.0% exp.

> US August CPI & Core CPI : 0.4% & 0.4% v. 0.3% & 0.2% exp.

 

Weekend Headlines (BBG)

 

> Coronavirus is now spreading rapidly again across the U.K. for the first time since March with restrictions being put in place to combat the spread

> The EU/UK remain in a deadlock over parts of their divorce agreement, with tensions high

 

What you need to know

 

It was a relatively quiet session on Friday as markets digested the lack of strong negative EUR commentary from the ECB, with most traders sitting on their hands with the Buck trading in a tight range. The data docket was very light in Asia, with no data to move the needle the Aussie traded sideways against the Greenback before making another run at the 0.7300 handle in early London. The focus in Europe is on the disagreement to their finalisation of the Brexit agreement, with PM Johnson’s party taking a hard line approach and wanting to re-draft parts of the already signed agreement. The GBPUSD has been a very poor performer since the commentary ratcheted up, and was down as much as 3% for the week against the Dollar.

 

Despite the ECB’s leader deciding not to talk down the 10% rise in the EUR in their statement on Thursday night, the ECB’s chief economist Lane commented that the inflation outlook is likely to be weak due to the substantial rally. EURUSD shrugged off any negative news, rallying and now back towards the 1.1800 middle. During the US session equity markets were the focus, and with tech shares having a rocky week they were able to edge out slight gains and dragged the S&P500 up to close 0.05% up. US consumer inflation numbers showed a slightly better uptick in prices, however following the recent change in policy from the Fed there is still plenty of room for inflation to rise before markets can expect any movement in rates. In commodities, Base metals performed very well, likely buoyed by comments from China that they plan to boost their state stockpiles and giving investors confident that Chinese demand will remain steady. Gold was down 0.25%, while WTI crude also looked to pare back some of its weekly losses to finish up 0.75%.

 

The Day Ahead

 

Data

 

> NZ August Visitor Arrivals : 65.6% prev.

> EU August Industrial Production : 2.8% exp.

 

Expecting a very quiet start to the week, with a light data docket today’s session should be dictated by sentiment driven by equity futures and medical news. AstraZeneca has restarted their stage three trial after the brief investigation into the unknown illness, while the UK and parts of North America has seen an uptick in COVID-19 cases showing that the virus is still a major part of everyday life.

 

The weekly focus will be on the Fed’s monetary policy decision on Thursday, with the AU employment numbers, NZ GDP and the Bank of England’s decision all coming out on what should be a very busy Thursday across markets. We also edge closer and closer to what will be a volatile October in financial markets as the US prepares for a heavily contested election in November.

 

Range for the day : 0.7240 – 0.7310

 

AUD/USD Technicals

 

The pair is sitting comfortably in its recent range below the 0.7300 handle, with the inability to hold the week above showing that more downside risk remains for the pair. Support seen around 0.7259 with the 0.7182 level to target on a sustained move lower. The YTD high of 0.7414 will need to be broken to see further upside, range bound until then.