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Global Market Update
The View from Australia

Craig Killaby January 21, 2021



> AU January MI Inflation Expectations : 3.4% v. 3.5% prev.

> AU December Employment Change & Unemployment Rate : 50.0K & 6.6% v. 50.0K & 6.7% exp.

> JP BOJ Monetary Policy Statement & Rate Decision : -0.10% v. -0.10% exp.

> EU ECB Monetary Policy Statement & Decision : 0.0% v. 0.0% exp. (no change)

> US January Philly Fed Manufacturing Index : 26.5 v. 11.2 exp.

> US Unemployment Claims : 900K v. 930K exp.

> EU January Consumer Confidence : -16 v. -15 exp.


Overnight Headlines (BBG)

> ECB President Lagarde signalled that the downside risks are lessening, while commenting that inflation pressures are starting to peek through in her press conference

> BOC Gov. Macklem commented that there is enough stimulus in the economy to withstand the downturn, noting that a stronger Loonie would impact the recovery

What you need to know

The risk rally continued yet again as the Biden Presidency took over as investors eyed what may be ahead in his first 100 days. Local investors focused on the December employment report, which was relatively positive with 50K jobs being added across AU in the month with the full-time jobs leading the way with the majority of the gains. The unemployment rate also notched down to 6.6% as it is clear that the economy continues to recover following the COVID19 shock. The next employment report may show signs of weakening due to the December lockdowns, however the next major report will come once Jobkeeper stimulus measures are removed come April.


The AUD looked poised to regain the 0.7800 handle, although ran into some resistance at 0.7780 to finish with an intraday high of 0.7782. The crosses looked strong throughout the session, with AUDEUR approaching multi-year highs ahead of the ECB’s meeting. The meeting in Europe showed that policymakers are pleased with the state of the recovery, with signs coming from the central bank that stimulus may be slowing as inflationary pressures start to appear. EURUSD is up on the session, now sitting above 1.2150 and the AUDEUR off its recent highs. Comments from the Bank of Canada Gov. Macklem were similar to the ECB as it seems to be clear that the amount of stimulus that is going to be pushed into the economy in 2021 will be far less as inflation seems to be on their minds. The Buck is down across the board, with the DXY down 0.4% as the four day losing streak continues. There is no stopping equity markets, as the S&P500 continues its run higher up 0.2% as investors look ahead to more stimulus to come from a Biden/Blue Senate landscape. US bond yields higher across the curve as further bear steepening occurs. Very marginal moves in commodity markets, with most assets unchanged as Iron Ore up 1.7% on the session stabilising at these very high levels.


The Day Ahead




> NZ Q4 CPI : 0.2% exp.

> AU January Flash Manufacturing & Services PMI : 55.7 & 57.0 prev.

> AU December Prelim Retail Sales : -1.5% exp.

> UK December Retail Sales : 1.4% exp.

> EU January Flash Manufacturing & Services PMI : 53.5 & 45.2 exp.

> UK January Flash Manufacturing & Services PMI : 53.5 & 45.2 exp.

> CA November Core Retail Sales & Retail Sales : 0.3% & 0.0% exp.

> US January Flash Manufacturing & Services PMI : 56.6 & 53.3 exp.


Local investors will have their eyes across the Tasman as the Q4 inflation numbers drop in NZ first up this morning, while AU preliminary retail numbers for December also hit the wires. It is PMI day across the world with Europe and the US due to print, as the services numbers are expected to see significant drops in the most recent figures. No reason to see the ranges broken today for the AUDUSD, with eyes well and truly on next week’s Fed meeting.


Range for the day : 0.7720 – 0.7785


AUD/USD Technicals


The bullish momentum ran into a bit of a speedbump at the 0.7780 level, although sitting in the 0.77-middle as I write the trend is still well and truly pointing to the upside. No change to the technical picture, with 0.7660 still the key on moves lower with 0.7800/20 needing to be broken to bring 0.7917 back into play.