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Global Market Update
The View from Australia

by Craig Killaby | October 12, 2021

Data/Speakers

 

> AU September NAB Business Confidence : 13 v. -6 revised prev.

> US August JOLTS Job Openings : 10.44Mio v. 10.95Mio exp.

> US FOMC Members Clarida and Bostic to speak – “There is a flavour of stagflation right now” ; “The FED is going to be comfortable with a bit more volatility in inflation”   

 

Overnight Headlines (BBG)

> Comments from FOMC members Clarida and Bostic added to the narrative taking over markets that the Federal Reserve will embark on their tapering of policy in the coming months as inflation pressures mount

What you need to know

Markets are starting to re-calibrate their expectations around inflation, with all eyes on their evening’s consumer inflation print from the US as commodity prices and widespread inflation pressures continue to push higher. Business confidence figures in Australia have started to rebound, as the reopening of NSW amidst a drop in COVID cases and high vaccination rates see investors support the AUD as a strong Q4 becomes even more likely. The AUDUSD touched yet another fresh high below the 0.7400 handle, with 0.7385 the peak before settling back in around the 0.7350 mark ahead of this evening’s CPI print and today’s China numbers.

 

EURUSD continues to struggle mightily, as central bank policy tightening is starting to peek into the story the lagging tapering plan from the ECB has put downward pressure on the currency and hanging on above the 1.1500 level. Comments from Fed members around the persistent inflation that is being seen across markets added even more fuel to the likely tightening from the Fed, as they seem to be acknowledging that the transitory nature of the price increases is decreasing.

 

The Dollar is regaining some of its momentum, up 0.2% on the DXY and looking poised to break through key levels on the topside. UST yields seeing some movement on the shorter end, with the 2y spiking on the inflation angst. Commodity markets mixed on the day, having a whippy session as the volatility increases Iron Ore was unable to hold gains and down 2% while Copper lagged down 0.8%. WTI crude continues to be the one to watch, holding firm above US$80barrel levels as shortages keep the price elevated.

 

The Day Ahead

 

Data

 

> AU October Westpac Consumer Sentiment : 2.0% prev.

> NZ October Prelim ANZ Consumer Confidence : -7.2% prev.

> CN September Trade Balance (USD) : 46.5Bio exp.

> US September Core CPI & H/Line CPI : 0.3% & 0.2% exp.

> US FOMC Meeting Minutes

 

Expecting today’s WBC consumer sentiment figures to show the rebound as the reopening of NSW buoys sentiment. Chinese trade figures around mid-day will give markets something to digest ahead of what is a pivotal overnight session for the USD and markets as a whole. Consumer inflation for September hits the wires first up tonight, with upside prints making is very difficult for the Fed not to taper in November. While, the FOMC meeting minutes may provide more insights into the thought process of policymakers as they debate the transitory nature of these price increases. Wide range reflects the important data session ahead.

 

Range Today : 0.7325 – 0.7410

 

AUD/USD Technicals

 

The continued move higher and higher highs shows the momentum turning bullish ahead of the key 24 hour session. A break of the overnight high of 0.7385 in today’s session would bring the 100DMA at 0.7423 into play. The pair has had little to show above the 0.7400 handle, so expect to see some selling pressure on a break although momentum has clearly rebounded. 0.7326 is the target on moves lower, with 0.7290 needing to be broken to see a drift back toward 0.7226.

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