> NZ RBNZ Official Cash Rate Decision & Statement : 0.50% v. 0.50% exp. (0.25% increase)
> EU August German Factory Orders : -7.7% v. -2.3% exp.
> US September ADP Non-Farm Employment Change : 568K v. 425K exp.
> US EIA Crude Oil Inventories : 2.3Mio v. 0.8Mio exp.
Overnight Headlines (BBG)
> US Republican leader Mitch McConnell has offered an agreement that would extend the debt ceiling debate until the start of December as the US edges closer to the key deadline
> The RBNZ raised their benchmark lending rate, citing inflation concerns despite NZ having lingering COVID cases as their COVID-zero strategy is raising questions
What you need to know
A fairly interesting session in Asia, as the RBNZ was on the minds of investors in APAC as they readied to raise their lending rate. Prior to the announcement local markets saw APRA raise the loan serviceability requirement from 2.5% to 3% in a small effort to tame the red hot housing market, putting a slight dent in some of the major bank’s share prices for the session. The RBNZ delivered on their promise to increase their benchmark rate, up 0.25% to 0.50 and far off their initial prospect last year of turning rates negative. Choppy trading for both the NZD and AUD in the aftermath, with NZD rallying briefly before being sold off sharply and finishing the session down 0.6%. The AUDNZD cross is looking much stronger, back above 1.0500 and looking poised to break higher. Markets are pricing in more increases to come from the RBNZ in November and February as the Central Bank rushes to normalise rates to tame inflation.
Overnight, the Dollar started to regain some of its momentum as the EURUSD continued to struggle, moving lower yet again and touching a 15month low of 1.1527 in the process. Concerns are mounting by the day around the rising prices of energy across Europe and the world, with the Dollar being the major benefactor as risk aversion took over. The US session had the release of the private payroll numbers ahead of the official Friday release, coming in well above market estimates although investors may have learned their lesson that these have little correlation with the main event on Friday. The debt ceiling debate has been the dominating factor in markets this week with China off, and it seems to be coming to a conclusion until next month with the Republicans offering an olive branch to raise the ceiling until December and stave off a default of epic proportions. US equities had a very whippy session, being sold off steadily throughout the day and rebounding over 1.3% leading into the close on the GOP’s offer and continuing higher as I write this morning. Commodity prices are looking a touch shaky with metals down marginally, however the price of WTI crude took a hit as EIA stockpiles increased on the week, seeing the price fall over 2%. UST yields are starting to really whip around, with the 10y breaking the 1.5700% mark very briefly, only to retreat below the 1.5300% mark this morning.
The Day Ahead
> AU September AIG Services Index : 45.6 prev.
> EU ECB Monetary Meeting Accounts – September Meeting
> US Weekly Unemployment Claims : 350K exp.
> US FOMC Member Williams to speak
> CA BoC Gov. Macklem to speak
With the lack of data on the docket today, expecting risk sentiment to continue into the local session as the debt ceiling uncertainty unwinds for the time being. Eyes will be on the US NFP report tomorrow, and China’s return from their holiday as volume starts to increase during the session. Announcements are also expected in NSW on some tweaks to the reopening, with a more aggressive tone expected from the new business-first Premier.
Range Today : 0.7260 – 0.7315
Fairly basic technical levels as the pair seems to be trapped in the recent range below the 0.7300 handle. The overnight low of 0.7226 should act as support intraday, however the momentum seems to be building towards the topside as equities recover rapidly. Would not be surprised to see the high of 0.7292 retested today, with the 55DMA (0.7315) the target on a break.
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