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Global Market Update
The View from Australia

Craig Killaby September 16, 2020



> AU September MI Leading Index : 0.5% v. 0.1% prev.

> UK August CPI & Core CPI : 0.2% & 0.9% v. 0.1% & 0.7% exp.

> EU July Trade Balance : 20.3B v. 19.3B exp.

> CA August CPI : -0.1% v. 0.1% exp.

> US August Core Retail Sales & Retail Sales : 0.7% & 0.6% v. 1.0% & 1.1% exp.

> US July Business Inventories : 0.1% v. 0.2% exp.

> US EIA Crude Oil Inventories : -4.4M v. 2.1M exp.

> US FOMC Economic Projections, Statement & Rate Decision : <0.25% v. <0.25% exp. (no change) (4am AEST)


Overnight Headlines (BBG)


> The Federal reserve kept policy unchanged at their September meeting, signalling that rates will be near zero until at least 2023 when they believe inflation will be over 2% for a longer period of time with Powell also mentioning more fiscal support will be needed

> Reports of a vaccine before the end of the year are questionable, as a top US health official signaled March 2021 as the most likely timing


What you need to know


Yesterday in Asia was slightly more eventful than initially thought, as investors jumped on a weaker Dollar following the strongest Yuan fixing by the PBOC in months while an FTC probe into Facebook created brief market jitters. The Facebook news sent US futures lower as reports that the Federal Trade Commission is looking into the tech giant in an anti-trust suit, likely showing the fragile state of the recent tech rally as investors cautious of another rout. The Dollar came under pressure on the PBOC’s Yuan fixing, near 0.6% stronger (most since April) and buoying the AUD in the process. The Aussie rallied to a session high of 0.7321 with investors focused on the important FOMC decision early this morning.


The Fed kept their policy unchanged, with markets seemingly looking for some sort of longer term guidance, Powell & Co. were reluctant to provide much past 2023 with rates staying near zero until then. Fed Chair Powell stated that they are also pleased with the current state of their asset purchase program while leaving the door wide open for a change on the fly, and emphasizing that fiscal stimulus will be needed. The Buck is a touch stronger on the day, with the longer dated UST yield curve seeing some movement with the 10y and 30y yields rising.


Price action in FX was mixed amongst the majors, with JPY the best performer of the session up as much as 0.6% against the Dollar. The AUD and NZD were mixed with the AUD a touch softer this morning although rallying as I write, while the NZ optimistic economic outlook continues to buoy the Kiwi as it opens up 0.2% higher. Most of the AUD crosses are looking worse this morning, with the exception of AUDEUR, which opens up higher on the EUR underperformance. US equity markets finished the day in the red, with investors likely looking for stronger signals of increased support from the Fed as the floor for equities lowers a touch seeing the S&P500 down 0.46%. Commodities a story yesterday, with the price of Iron Ore seemingly in freefall down near 4% on the session, while WTI crude got a solid boost from the larger than expected contraction of US oil stockpiles and rising over 5%.


The Day Ahead




> NZ Q2 GDP : -12.5% exp.

> AU August Employment Change & Unemployment Rate : -40.0K & 7.7% exp.

> AU RBA Bulletin

> JP BOJ Monetary Policy Statement & Press Conference : -0.10% exp. (no change)

> UK Bank of England Official Bank Rate Decision : 0.10% exp. (no change)

> US July Business Inventories : 0.2% exp.

> CA August ADP Non-Farm Employment Change : 1.149mio prev.

> US September Philly Fed Manufacturing Index : 15.0 exp.

> US Unemployment Claims : 825K exp.


Super Thursday continues today, with the Fed out of the way next up will be the AU August employment report as markets will get a full picture as to what the strict lockdown in VIC has had on the labour market. There is a chance that the report will be viewed as optimistic with employment likely to have bounced back in all states except VIC, the question is how devastating has that lockdown been.


The BOJ unveils their policy decision, with no change likely. While the Bank of England is also expected to keep policy unchanged, with Brexit commentary watched. US unemployment claims will hit the wires tonight, and with last night’s retail figures missing the mark by a wide margin, the economy seems to have run into some stumbling blocks on a rapid recovery and this report should provide more insight.


Range for the day : 0.7265 – 0.7355


AUD/USD Technicals


The pair is still trapped in its weekly range hovering around the 0.7300 handle, with resistance seen yet again at the intraday high of 0.7345. A break of resistance is likely to see the pair make another run at the 0.7414 level. Support seen near 0.7283, with a break of the weekly low of 0.7259 bringing 0.7182 back into focus for bears.