> AU November MI Inflation Expectations : 3.5% v. 3.5% prev.
> UK October Industrial Production : 1.3% v. 0.3% exp.
> EU ECB Main Refinancing Rate & Decision : 0.00% v. 0.00% exp.
> US Unemployment Claims : 853K v. 723K exp.
> US November CPI & Core CPI : 0.2% & 0.2% v. 0.1% & 0.1% exp.
Overnight Headlines (BBG)
> The EU approved a 2.2trillion EUR budget that provides ample fiscal stimulus to assist the region rebound from the COVID19 pandemic
> Brexit talks continue to offer little progress with the UK PM warning that a no-deal Brexit is a real possibility
What you need to know
The selloff in the USD continues with commodity pairs the major benefactors on strong gains in commodity markets overnight. The AUD looked poised to break through the recent highs in late trade yesterday, and it took some stimulus from both the ECB and the EU to see a further breakout and breach the 0.7500 handle fairly easily. The ECB did not disappoint in their monetary stimulus, with 500bio EUR being provided by Lagarde & Co. while noting that all the funds may not be needed and that the EURUSD exchange rate is being monitored. The EU leaders also came to the party by approving a 2.2trillion fiscal budget to complement the ECB’s actions, with plenty of government support to assist the region with what will likely be a difficult recovery. Brexit talks do not seem to be heading in the right direction, with PM Johnson telling the UK to brace for a no-deal Brexit, the worst case scenario for the region. GBPUSD slid to hover around the 1.3300 handle, with Sunday now the deadline for an agreement between the two sides.
In the US, the data continues to paint a negative picture for the economy as the fresh lockdowns leading into the winter has seen the unemployment claims jump by over 10% this week. The inability for the US lawmakers to agree on a support package puts downward pressure on the prospects, while the USD continues to struggle as investors look elsewhere for havens. The DXY is down 0.35% as I write, with the EURUSD back up over 1.2100. The Aussie and its crosses are looking healthy, with the local currency posting the highest levels since 2018 at 0.7535 and up 36.7% from the March lows. Equity markets in the US are in the red at the time of writing, with the S&P500 in a bit of a holding pattern awaiting congress to come to an agreement. Commodities are the story, with WTI crude up a whopping 3.3% from yesterday, while base metals continue to soar with Iron Ore up near 6% while Copper 3% higher. Gold remained steady, up 0.2%.
The Day Ahead
> AU November Business NZ Manufacturing Index : 51.7 prev.
> EU November German Final CPI : -0.8% exp.
> UK BOE Gov. Bailey to speak
> EU Economic Summit
> US November Core PPI & PPI : 0.2% & 0.1% exp.
The strong end to the week signals that the path towards 0.8000 for the AUDUSD may be much closer than initially thought, a combination of a weaker USD, strong commodity prices and the domestic recovery key factors in the move. With the AUDUSD sitting at levels not seen since 2018, there may be some profit taking today, however any positive headlines may see further upside. The data is light to finish the week, however the headlines remain in focus, with further upside in the AUD likely.
Range for the day : 0.7480 – 0.7560
The bullish momentum is building, and sitting at the highest levels since mid-2018 there is likely to see some profit taking today for those holding long positions. There seems to be little in the way of a move higher, breaking through resistance at 0.7485 yesterday with easy, stops triggered at 0.7500 sees the pair much higher from yesterday. Need to see a close above 0.7500 for the chances of another leg up, however very difficult to see a sustained move lower, with the buoyed by the outstanding commodity moves.
“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.
Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.
Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.
This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.
Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.
Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.
FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.
This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.
Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.
The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.
© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See www.cambridgefx.com for contact details.