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Global Market Update
The View from Australia

Craig Killaby December 22, 2020



> AU November Prelim Retail Sales : 7.0% v. 2.1% exp.

> EU December German GFK Consumer Climate : -7.3 v. -8.7 exp.

> US Q3 Final GDP : 33.4% v. 33.1% exp.

> US December CB Consumer Confidence : 88.6 v. 97.1 exp.

> US December Richmond Manufacturing Index : 19 v. 11 exp.


Overnight Headlines (BBG)

> The US congress passed another relief bill, providing US$900bio in support although the bill has drawn criticism for the amount of allocated funds to questionable areas

> UK and EU negotiations continue, with the two sides rushing to have a deal done before Christmas as the new strain of COVID19 provides another significant roadblock for the European economy

> COVID19 cases in NSW dropped again on Tuesday, with 8 locally acquired cases boosting optimism that NSW may be able to have Christmas after all

What you need to know

As we get deeper into the week, the volumes continue to thin out and moves become more pronounced as risk off seems to be the tone that is being taken by markets heading into the Christmas period. There was some local optimism following the announcement of single digit new cases in NSW following a record day of 44,000 tests as the government is due to make a decision on the fate of Christmas today at 11am AEDT. The data in AU continues to point to significant progress in the recovery as retail sales jumped 7% in November following a reopening of Victoria as consumer confidence was at decade highs. Reaction in the AUDUSD was muted, with the focus largely offshore as fresh lockdowns across Europe and North America damaged sentiment. It was a slow drift lower for the Aussie as the GBP continues to slide with a lack of major progress on Brexit and the new super-COVID strain causing concern across the world.

The US was able to pass their much talked about funding bill, however market reaction was minimal as investors had largely priced this in. Flows into havens the key in FX markets, with the USD regaining its haven appeal and seeing the DXY rally 0.7% and bouncing yet again off the lows. AUSUSD touched a low of 0.7517 late last night, and sitting only a touch higher as I write this morning. Local equity markets continued its soft week, with the ASX down 1% while the S&P500 was unable to catch a bid on the relief bill down 0.2%. Tough session in commodities as risk aversion took over, with Iron Ore down 7% while WTI crude is down 1.8% following an announcement that Russia plans to ramp up production in the New Year.

The Day Ahead




> JP BOJ Monetary Policy Meeting Minutes

> AU November Private Sector Credit : 0.1% exp.

> CA October GDP : 0.3% exp.

> US Unemployment Claims : 882K exp.

> US EIA Crude Oil Inventories : -3.1M exp.

> US December UoM Consumer Sentiment : 81.0 exp.


This morning’s press conference from the NSW Premier will be important for those living in NSW, with hopes of a relatively normal Christmas hanging in the balance. The thinner volumes have seen the ranges widen as we head into the end of the year, with the risks seeming to point to the downside with the emergence of this new virus strain. The focus overnight will be on the unemployment claims out of the US, while Brexit negotiations remain top of mind.


Range for the day : 0.7480 – 0.7570


AUD/USD Technicals


There is likely to be support for the pair around the recent low, targeting 0.7480 on another selloff. The upside remains limited on fresh virus fears, with resistance seen at the 0.7600 handle as the YTD high of 0.7640 still remains a major obstacle.