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Global Market Update
The View from Australia

by Craig Killaby | July 12, 2021



> JP June PPI : 5.0% v. 4.8% exp.


Overnight Headlines (BBG)

> Expectations in NSW of a long COVID winter are starting to mount, with the state recording the highest case numbers since March 2020 as the vaccine rollout continues to struggle

What you need to know

A lack of data to kick off the trading week saw a relatively uneventful trading day, however a surprising article from the AFR sent the AUDUSD sliding mid-morning. An article was released by the Australian Financial Review that reported that APRA has asked local financial institutions to prepare their models for negative rates. The article is a surprise as it is a stark contrast from the comments from local RBA Gov. Lowe that negative rates are not something that they are looking at to assist in the recovery. It seemed as though the move might have been just a worst-case scenario disaster planning recommendation, nonetheless the AUDUSD was sold off throughout the day, although likely to have been more the move in USDCNH that caused the real movement.


FX markets open up this morning largely unchanged, with the Dollar up a touch and holding above the 92.00 level on the DXY, as the rise of the Delta variant around the world grows. UK health officials are bracing for potential health risks to come from the complete abandonment of restrictions with “Freedom Day” fast approaching on July 19th with GBPUSD largely unchanged.


The overnight session was very light in terms of data, with all eyes on the US CPI report to come this evening with inflation back on the mind of investors. UST yields rose amidst weak demand at the overnight auction, with the UST10y yield back up above 1.3600%. Equity markets both locally and abroad had a decent start to the week, with the ASX up 0.8% while Chinese stocks gained following the RRR cut from the PBOC. US equities continue to trudge higher with the S&P500 setting yet another all time high and looking poised to take the 4400.00 level. Commodity markets mixed, with Base Metals the strongest performers on the session as both Iron Ore and Copper are up on the session with Copper up 1.5%. Gold down a touch on the slight move higher in US yields, while WTI crude opens up down 0.6%.


The Day Ahead




> AU June NAB Business Confidence : 20 prev.

> CN June Trade Balance : 271Bio exp.

> EU June German Final CPI : 0.4% exp.

> US June Core CPI & H/line CPI : 0.4% & 0.5% exp.

> US FOMC Member Bostic to speak


Tier two data hitting the wires today in Asia, with the June NAB business survey kicking it off this morning and likely to show a pullback in both confidence and conditions in the wake of the recent spike of COVID19 cases.


Chinese trade figures will be the main event, with the data from China now in focus following the surprise move from the PBOC as questions arise as to the health of the Chinese economy.


All eyes on this evening’s US inflation report, due to be released at 10:30pm AEST as the inflation narrative takes centre stage yet again. Strong inflation numbers may see the Dollar surge as investors position for quicker Fed tightening, with a soft print likely to see a move higher in risk sentiment. NSW continues to be in focus at 11am AEST for those living in Sydney, with the extension of the lockdown widely expected to come at some point this week, with the question now being how long. Wide range to reflect this evening’s inflation read out of the US.


Range Today : 0.7440 – 0.7525


AUD/USD Technicals


Lower highs to kick off the week seems to be a concerning sign for AUDUSD bulls, with 0.7500 needing to be broken to bring 0.7520 into play. Not expecting a major break during today’s session, with the move likely to come overnight on the US inflation read. A strong CPI print leaves the YTD low of 0.7410 vulnerable, while 0.7525 is the upside target intraday.

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