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Global Market Update
The View from Australia

Craig Killaby January 10, 2021



> EU November German Industrial Production : 0.9% v. 0.7% exp.

> EU November German Trade Balance : 16.4Bio v. 18.5Bio exp.

> CA December Employment Change & Unemployment Rate : -62.6K & 8.6% v. -32.5K & 8.7% exp.

> US December Average Hourly Earnings & Non-Farm Employment Change : 0.8% & -140K v. 0.2% & 60K exp.

> US December Unemployment Rate : 6.7% v. 6.8% exp.

> US November Final Wholesale Inventories : 0.0% v. -0.1% exp.


Weekend Headlines (BBG)

> The US House of Representatives may vote on impeachment articles as soon as tomorrow, however unlikely to hit the Senate following the US Capitol siege

> US President Trump has been banned from many social media platforms after inciting the violence in Washington last week, the most notable being Twitter, Trump’s preferred method of communication

> US President Elect Biden has made calls for even further fiscal stimulus as the US COVID19 crisis deepens, with payments directly into Americans accounts likely to come

> The new strain of COVID19 is wreaking havoc across the UK, with the death toll in the UK hitting all time highs despite the strict lockdown measures

What you need to know

2021 has started off with a bang, following last week’s incredible scenes from the US the tensions remain as high as ever with Trump’s presidency entering the final 10 days. The price action since the previous update has been fairly dramatic, as the Dollar has come under further selling pressure as investors weigh up the first Democrat controlled Senate in eight years amidst calls for increased stimulus. The main data point on Friday was the US employment report for December, which showed some surprising numbers as the US economy lost 140,000 jobs in the month of December, although average hourly earnings shot up a whopping 0.8%. Inflation expectations are continuing to rise, as longer term inflation may be on a steady path higher as the financial system is flooded with fiscal and monetary stimulus as the COVID19 crisis enters a very dark period.

The price action in currency markets has seen those commodity based pairs that have benefited from rising commodity prices rise fairly substantially against the USD, with the AUD and the NZD two of the best performers over the last two weeks with the high in the AUD touching 0.7820 following the Democratic victories in Georgia last week. The Dollar did start to recovery late Friday, with the DXY bouncing back above the 90.00 handle as the power in the Senate now rests with moderate Democrat Senator Joe Manchin, who’s comments on the support of stimulus checks saw the equity markets move on the wavering of support. It has been one way traffic higher in both local and overseas equity markets, with the prospects of the Democrats having carte blanche of legislation following the Georgia wins investors have been a near 4% rise in the S&P500 since before Christmas and that is likely to continue following the inauguration in the 20th January. Commodities continue to be the story in 2021, with Oil, Copper and Iron Ore all kicking off the year with very strong footing. Lagging behind has been the prices of Gold and Silver, which have not been able to catch on from the inflation hedge as the flows seem to be heading into Bitcoin, which has seen a meteoric rise above US$40,000 as scarcity assets are bought.

The Day Ahead




> AU December MI Inflation Gauge : 0.3% prev.

> AU November Retail Sales : 7.0% exp.

> CN December CPI & PPI : 0.0% & -0.7% exp.

> EU ECB President Lagarde to speak

> US FOMC Member Bostic to speak


The Dollar does seem to be regaining some of its footing following the comments from US Senator Manchin as investors have done little to price in anything but a wave of immense fiscal support to come in the coming months. The US President elect is due to unveil what that stimulus package may look like on Friday, with headlines remaining very important as the US remains in a very tense situation.


Locally, the AUD is looking strong as the moves into commodity markets and the bearish Dollar have aided the move higher, with last week’s high of 0.7820 important on moves higher. Chinese inflation numbers are due to hit the wires today, with a continued move higher in producer inflation numbers a signal that global inflation may be on the rise. Apart from the midday Chinese data it will be Prelim retail sales numbers and the ECB President Lagarde’s comments this evening that will be driving the moves.


Range for the day : 0.7725 – 0.7790


AUD/USD Technicals


Although the pair remains bullish, there is a risk of a pullback after failing twice above 0.7800 last week, with a drift down back towards the 21DMA at 0.7625 a possibility. Moves higher will need to break through the recent high of 0.7820, with 0.7917 the level to watch.