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Global Market Update
The View from Australia

Craig Killaby February 23, 2021



> NZ Q4 H/line Retail Sales & Core Retail Sales : -2.7% & -3.1% v. -0.5% & -0.6% exp.

> AU January Prelim Goods Trade Balance : 8.75Bio v. 9.18Bio revised prev.

> UK January Claimant Count Change & Unemployment Rate : -20.0K & 4.7% v. 13.8K & 5.1% exp.

> EU January Final H/line CPI & Core CPI : 0.9% & 1.4% v. 0.9% & 1.4% exp.

> US February CB Consumer Confidence : 91.3 v. 90.2 exp.

> US February Richmond Manufacturing Index : 14 v. 16 exp.


Overnight Headlines (BBG)

> US Fed Chair Powell continued his dovish commentary signalling to markets that the Fed will maintain its supportive stance even into the likely recovery in the back half of the year

> Bank of Canada’s Gov. Macklem maintained that monetary policy will remain loose until Canada is able to rebound with a tightening labour market the key

What you need to know

The data docket was relatively quiet yesterday in Asia, with local investors having one eye on the testimony to come from the Chair of the Fed during the US session. The data highlight came by way of the AU preliminary trade balance numbers, which showed that both imports and exports dropped by 10% in January as the exports were primarily driven by a decrease in the quantity of iron ore and meats. Imports also pulled back in the month, as vehicle imports was the major driver there. Nonetheless, the iron ore exports were still the second highest on record behind the previous month of December as China continues to seek demand for irone ore to boost their recovery. The AUDUSD was able to peak above 0.7900 yet again, mounting a fresh three year high of 0.7934 before consolidating lower into the European session. The news out of the UK remains positive and supportive of the GBP, with the reopening to start ramping up with restaurants and bars planning to reopen in April.


In the US, Fed Chair Jerome Powell maintained his very dovish stance and confirming to markets that they will remain supportive for quite some time. The dovish commentary saw yields on the UST10y fall around 2bp while the steeping between short and long term yield curve continued. Equity markets in the US had a tough session as inflationary fears mount, the S&P500 is down over 1% at the time of writing. Commodity prices remain elevated with copper up another 1% on the session and WTI crude is able to hold steady as investors brace for demand increases on the reopening. Bitcoin took a massive tumble, down over 18% on the session while Gold down 0.25% on the strengthening Dollar.


The Day Ahead




> AU Q4 Construction Work Done : 1.1% exp.

> AU Q4 Wage Price Index : 0.3% exp.

> NZ RBNZ Monetary Policy Statement & Press Conference : 0.25% exp. (no change)

> UK MPC Member Haldane to speak

> UK Monetary Policy Report Hearings

> US Fed Chair Powell continues testimony

> US EIA Crude Oil Inventories : -6.5Mio exp.


The RBNZ will be in focus today, with the news of yet another COVID19 case in Auckland putting slight selling pressure on the Kiwi, the focus will be on the central bank’s path forward. Risks point to the upside for the NZD as the shift away from negative rate policy buoys the currency. Wage and construction numbers on the docket today in AU, however not expected to move the needle and shift the range. Powell continues his testimony this evening, although not expected to differ from this morning’s commentary, with the focus now shifting to the US fiscal support package as the next risk for the Dollar.


Range for the day : 0.7870 – 0.7950


AUD/USD Technicals


The 200expMA, now sitting at 0.7901 held up well with the intraday low at 0.7880 still acting as support in the short term. The risk of the Dollar rebound rests of the US fiscal support package, expected to come to a head in the coming week or two. Moves higher will need to test 0.7988, however the medium term is more likely to see an 0.8000 with inflationary pressures putting an upward trajectory on commodities.