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Global Market Update
The View from Australia

Craig Killaby January 19, 2021



> NZ Q4 NZIER Business Confidence : -6 v. -40 prev.

> EU December German Final CPI : 0.5% v. 0.5% exp.

> EU November Current Account : 24.6Bio v. 28.2Bio exp.

> EU January ZEW Economic Sentiment : 58.3 v. 54.1 exp.

> CA November Manufacturing Sales : -0.6% v. -0.2% exp.


Overnight Headlines (BBG)

> US Treasury Sec. appointee Yellen began her testimony to the Senate committee, emphasizing market set USD exchange rates while commenting that now is the time to ‘act big’ on fiscal aide with rates low

> Lockdowns across Europe have been extended to mid-February as countries around the world race to vaccinate their population with COVID19 causing havoc across much of the world

What you need to know

As expected, it was a relatively quiet day across financial markets with the US holiday lingering for the majority of the Asian session. The Aussie traded sideways around the 0.7700 handle, unable to break through in either direction touching a high of 0.7725 before paring gains. The focus is on the US as the outgoing administration takes their final days in power to enact Presidential pardons and take shots at China, with Sec. of State Pompeo condemning the action of China in the Xinjiang province. Markets in Europe were relatively optimistic despite the lockdowns in Germany and Scotland being extended until mid-February, while the EUR touched a high of 1.2145 against the Buck.

The focus was on the testimony of Janet Yellen, the incoming US Treasury Secretary and former Fed Chair, where her job was to sell the US$1.9trillion stimulus package to the Senate committee ahead of Joe Biden’s inauguration tomorrow. Markets reacted to the testimony in a risk-on mood, with higher minimum wage and further stimulus checks seeing risk appetite tilt to the upside as the rotation into back into the reflation trade took over. Political risks in the US are starting to dwindle as President Trump enters his final day in office, with a wave of pardons having little impact on the market mood. Tomorrow’s inauguration will hopefully go smoothly, with security ramped up as the US is at its most divided since he took office.

Market reaction on the day was a very marginal move higher in high beta currency pairs, with the AUD up 0.1% from yesterday’s open and the NZD unchanged on the session. The DXY is down 0.3% at the time of writing, with investors looking ahead to Biden’s first day in office, which is tipping to be a very busy one. US equity markets opened up after the holiday in a bullish mood, seeing the S&P500 up 0.9% at the time of writing following some positive earnings from major us companies. Moves higher in US bond yields saw the 10y up above 1.10%, as inflation pressures mount.  Commodity markets saw moves into WTI crude, up 1.6% on the weaker USD. Gold largely unchanged on the session, while Iron Ore took a hit down 1.5%.

The Day Ahead




> AU January Westpac Consumer Sentiment : 4.1% prev.

> UK December CPI & Core CPI : 0.5% & 1.3% exp.

> EU December Final CPI & Core CPI : -0.2% & 0.2% exp.

> CA December CPI : 0.1% exp.

> CA BOC Rate Decision & Press Conference : 0.25% exp (no change)

> UK Bank of England Gov. Bailey to speak

> US President Joe Biden to speak – following inauguration as 46th President of United States


Again, another day of very little data on the economic docket sees the focus well and truly on the headlines ahead of what will be a very busy end to the week both locally and over in the US. Tomorrow will see the inauguration of the 46th President, while locally we will have the release of the December job figures, which may be negatively impacted due to the lockdowns seen in the Northern Beaches during the Christmas period. A decision from the Bank of Canada is unlikely to see much change in policy, with market reaction limited as investors focus on the US and the policies that come from a Joe Biden Presidency.


Range for the day : 0.7660 – 0.7770


AUD/USD Technicals


The brief move higher in the USD is looking more and more like a dead cat bounce as we inch closer to the new administration in the US. The pair trading well within its recent range, with a breakout unlikely during the Asian session. Risks seem to be tilting to the upside as the policies of a Biden presidency pose risks to USD fundamentals, with a break of 0.7725 (intraday high) bringing 0.7789/0.7800 back into focus. Moves lower will need to see 0.7660 break and hold, with 0.7625 still the target.