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Global Market Update
The View from Australia

by Craig Killaby | April 20, 2021



> EU March German PPI : 0.9% v. 0.6% exp.

> UK March Claimant Count Change & Average Earnings Index : 10.1K & 4.5% v. 24.5K & 4.7% exp.

> UK March Unemployment Rate : 4.5% v. 5.0% exp.


Overnight Headlines (BBG)

> Political concerns are mounting in Europe, with German Chancellor Merkel’s party down in the polls ahead of the election in less than six months’ time

What you need to know

Interesting session across markets yesterday, with the AUD breaking through the 0.7800 handle late in the session although unable to hold on to the strong gains throughout overnight trading. Local focus was on the RBA meeting minutes yesterday, and they provided little that markets already didn’t know as the RBA remains poised to continue their support until full employment and economic recovery is completed. The RBA seems to be taking a wait and see approach before making any real policy shifts as the fiscal support removal is being monitored closely, with next month’s employment report very important. The big move yesterday came in AU bonds with the 3yr spiking in the aftermath of the minutes and supporting the AUDUSD rally seen immediately after. Also aiding in the local currency’s move towards 0.7800 was the strengthening of China’s offshore Yuan against the Buck, with nearly all the majors breaking higher throughout the back half of the day. GBPUSD was able to break through 1.4000, while the EURUSD took a run at the 1.2100 level only to fail about 20 pips before.


Political uncertainty in Europe, particularly in Germany took a bite out of risk sentiment later in the day with Angel Merkel’s party down in the polls ahead of the election later this year.  This while Europe is putting all hands on deck to attempt to ramp up their vaccination effort as COVID19 cases continue in the region. India has become a major concern, with the country posting 200K+ daily cases of COVID19 and causing immense concern that more variants will wreak havoc.


In the US, it was equity markets that were raising eyebrows as they were sold off with earnings of major tech names missing the mark. The S&P500 is down near 0.7% on the day, off the recent all time highs. UST yields dropped on the risk aversion, with yields down across the curve. Commodity markets had a tough session, with WTI crude taking a hit as reports surfaced that the Biden administration is planning to pass a bill that would leave OPEC open to antitrust suits. West Texas Intermediate was down as much as 3% on the news, although rallying to close the session down 1.5%. Gold caught a bid, up 0.4% while concerns about Copper consumption in China saw it trade 1% lower on the day.


The Day Ahead




> NZ Q1 CPI : 0.8% exp.

> AU March Prelim Retail Sales : 1.0% exp.

> UK March CPI : 0.8% exp.

> CA March CPI : 0.6% exp.

> CA Bank of Canada Rate Statement & Decision : 0.25% exp (no change)

> US EIA Crude Oil Inventories : -3.7Mio exp.


Local focus will be on the Q1 inflation numbers from across the Tasman, as AU investors and policymakers get a glimpse into what consumer prices may look like when they print onshore next week. Local consumption figures for March may give a slight gauge as to what the Jobkeeper removal has done for the household consumption while the Bank of Canada is on the docket this evening as they are tipped to remove some of their stimulus despite Ontario being in a strict lockdown.


Range for the day : 0.7705 – 0.7780


AUD/USD Technicals


The pair did not seem to like it much above the 0.7800 handle, retreating sharply after posting a high of 0.7816 in early London. There looks to be a chance to break higher as the Dollar strength may simply be a brief bout of haven buying as the news flow doesn’t seem like a fundamental shift. EXP200DMA at 0.7742 break will likely signal a move back towards 0.7780, which is the target today.

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