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Global Market Update
The View from Australia

by Craig Killaby | October 7, 2021

Data/Speakers

 

> AU September AIG Services Index : 45.7 v. 45.6 prev.

> US Weekly Unemployment Claims : 326K v. 350K exp.

 

Overnight Headlines (BBG)

> Russia has offered to eased the energy crisis in Europe by increasing their supply to their European storage facilities, easing nerves that the crisis for the time being

> A vote on the US debt ceiling is scheduled for 10:30am AEDT as the two sides kick the problem down the track for another two months

What you need to know

A clear risk-on tone was the theme for markets across the sessions yesterday, as investors felt a sense of calm as Russia offering to assist in easing the gas shortages in Europe while commodity prices rebounded across the board as China comes back from their holidays. The AUD was the best performing currency against the sideways trading Dollar, as new NSW Premier Perrottet took a slight turn away from the health advice to embrace a more aggressive re-opening plan as restrictions are set to ease from the 11th October. As vaccinations rise, there seems to be room for upside in the pair although a black swan event coming from China cannot be ruled out as yet. The Chinese are back today, thus bringing those risks that were out of sight and mind for a week right back to the forefront. Questions as to what may happen on a Evergrande collapse still linger, and any developments would be felt strongly in local markets.

 

In the US, the calming of nerves due to the debt ceiling agreement was felt in equity markets as the risks were unwound and investors looked ahead to what is likely to be a very strong rebound in global growth as vaccinations rise around the world. UST yields rose as investors started to price in those prospects, rising sharply across the curve with the 10y back up over 1.57% as I write this morning. The S&P500 is back up over 4400, and finishing the session near 1.3% ahead of tonight’s key data. Natural gas and Gold were down on the session as the additional supply and higher rates hindering investment, while WTI crude is up 2.2% and base metals performed well with Copper and Iron Ore gaining ahead of China’s return today.

 

The Day Ahead

 

Data

 

> AU RBA Financial Stability Review

> CN September Caixin Services PMI : 49.3 exp.

> CA September Employment Change & Unemployment Rate : 59.5K & 6.9% exp.

> US September Average Hourly Earnings : 0.4% exp.

> US September Non-Farm Employment Change & Unemployment Rate : 490K & 5.1% exp.

 

The busiest day of the trading week has come, with China back at their desks and the volume returning the day seems to be set up for another move higher for the AUDUSD. Chinese data and a stability report from the RBA will have our attention in Asia, while US congress is expected to vote and pass and extension of the debt ceiling this morning.

 

It will all be about the US employment report this evening, with the Federal Reserve focused on the tightening of the labour market this report could have large ramifications for their tightening path. Expecting a move back towards the 0.7300-middle as sentiment seems to have taken a positive turn.

 

Range Today : 0.7275 – 0.7355

 

AUD/USD Technicals

 

Opening up above the 55DMA bodes well for a move higher in early trading, with the overnight high of 0.7324 well in range as risk sentiment tilts to the upside. There seems to have been little appetite to hold the Aussie above 0.7300, however this may change today with China volume back in play. The US holiday may see some Dollar demand heading into the fixing, with support now sitting all the way down to the weekly low of 0.7226.

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