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Global Market Update
The View from Australia

Craig Killaby December 23, 2020

Data/Speakers

 

> AU November Private Sector Credit : 0.1% v. 0.1% exp.

> CA October GDP : 0.4% v. 0.3% exp.

> US Unemployment Claims : 803K v. 882K exp.

> US EIA Crude Oil Inventories : -0.6M v. -3.1M exp.

> US December UoM Consumer Sentiment : 80.7 v. 81.0 exp.

 

Overnight Headlines (BBG)

> The US stimulus bill has been passed by Congress, however US President Trump has asked for amendments of the bill to reflect US$2000 stimulus cheques rather than the US$600 that have been approved

> The UK/EU look to have an agreement outline for a Brexit trade deal, with the potential of a formal agreement signed off as soon as tonight

> COVID19 cases in NSW continued at their constant rate, with 8 new locally acquired cases although Christmas will be a touch different this year with many in the Northern Beaches in isolation

What you need to know

We head into the Christmas period with markets focused on the negative risks of COVID19, with the new strain in the UK causing concern across Europe while the US braces for what will likely be a very difficult few months ahead as the vaccine rollout continues. As the trading volumes thin out, the moves have become more pronounced as the AUDUSD traded as low as 0.7517 before rebounding back towards the 0.7600 handle. Risk appetite has been the driver, taking a slight hit on the comments from the US President on the amendment of the COVID19 relief bill as he commented that the bill contained a lot of unneeded aspects while urging for US$2000 cash payments to Americans. There was a slight risk off tone, however this changed during the European session as the likelihood of a Brexit trade deal increased. It looks as though the two sides have come closer to an agreement on a trade deal, with the potential announcement to come as soon as this evening. GBPUSD surged up to 1.3571, nearly erasing all of the recent losses seen in the past few days. The Aussie jumped on the Dollar weakness overnight, riding the risk on wave towards a high of 0.7591 with the DXY down 0.3%.

In the US, the data surprised to the upside as unemployment claims fell this week although the personal income levels dropped 1.1% as the COVID19 lockdowns had their impact. Equity markets were able to rise 0.4% in the US as the S&P500 rallied on stimulus optimism. While the COVID situation continues to be of major concern, with hospitalizations hitting record levels and deaths hovering around the 3000/day mark as the vaccine rollout ramps up. Commodity markets maintain their bullish trend, with WTI crude up over 2.4% on the drop in US crude stocks in the recent EIA report. While both Iron Ore and Copper elevated, as Gold looks to press ahead up 0.4%.

The Day Ahead

 

Data

 

> JP December SPPI : -0.6% exp.

> Markets Closed – Christmas Day

 

Not expecting huge moves today on Christmas eve, although this year does feel quite different to years past with the news flow continuing right up to the holiday. There is a chance of a risk selloff leading into the holiday period, as holding into a number of days off may take some bravery with the COVID risks ramping up as the new UK strain worries health officials everywhere. The USD does seem to be on the back foot, however expecting a bid at the end of the US session. A Brexit deal will likely cause that move, with the headlines remaining the driver.

 

Range for the day : 0.7520 – 0.7595

 

AUD/USD Technicals

 

2020 has been a wild ride for the pair, up nearly 38% from the March lows the slow devaluation of the USD has been the theme. Holiday trading has skewed the technical levels, however optimism may see a break back up above 0.7600 with 0.7615 targets. Downside moves will need to breach support seen at 0.7470, while 0.7520 will provide the key.

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