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Global Market Update
The View from Australia

by Craig Killaby | October 13, 2021



> AU October Westpac Consumer Sentiment : -1.5% v. 2.0% prev.

> NZ October Prelim ANZ Consumer Confidence : -8.6 v. -7.2 prev.

> CN September Trade Balance (USD) : 66.8Bio v. 46.5Bio exp.

> US September Core CPI & H/Line CPI : 0.4% & 0.2% v. 0.3% & 0.2% exp.

> US FOMC Meeting Minutes – Members discussed a taper that would cut purchases by  US$10bio/month in USTs, and US$5Bio/month in MBS; to begin in either mid-November or mid-December


Overnight Headlines (BBG)

> Financial markets finally saw some details in the Fed’s tapering path, with the FOMC meeting minutes providing timing and amounts on what a QE taper would look like before the end of the year

What you need to know

The Asian session continues to see range trading, with a real lack of direction the theme despite the trade data from China hitting the wires. It seems as though local investors are looking past data prints in AU, with the economy in NSW re-opening and vaccination rates ramping up, confidence is due to increase dramatically for businesses in the upcoming months. AUDUSD traded in a tight 20pip range for the majority of the day, with Chinese exports continuing to support their economy while imports lagged street estimates. The strong exports from China may be short lived as the energy crisis looms, while the Beijing Olympics in February may see a substantial drop in industrial output as clear skies become important for optics on the world stage. USDCNH was steady post release, however fell 0.5% as the inflation angst from the Americans picked up. The European session gave little to offer in terms of major moves, with most market participants sitting on their hands ahead of the key data out of the US.


Inflation in September continued to push higher, with the headline number coming in above forecasts and now sitting well above the Fed’s 2% goal. Strong moves seen in USTs, with the 10y yield dropping substantially off from the recent highs to sit at 1.5400% at the time of writing. The move higher in yields was seen on the shorter end, with the 2y yield jumping and opening up today at 0.3600% and rallying as much as 5.6bps on the September consumer inflation print. Early this morning, the FOMC meeting minutes gave markets insights into what exactly “soon” meant in terms of the tapering plan from the Fed. The members outlined a plan that would begin in either mid-November or mid-December and would see the purchases cut by US$10bio/month for USTs and US$5bio/month in mortgage backed securities.


The Dollar struggled on the session, down 0.5% in DXY terms and sitting only a touch above the 94.00 level as I write this morning. US equity markets remain resilient as US earnings season picks up, with the S&P500 up near 0.4% despite the hawkish narrative from the FOMC. The AUD and NZD were two of the better performers, while the EURUSD seems to be regaining some of its losses and only a touch below 1.1600. Commodity markets remain top of mind, with Gold seeing a strong move higher as the move lower in US rates boosted the haven appeal. Copper gained, up 4% while the price of coal retreated a touch off of highs despite Chinese producers struggling to keep online as power shortages take over. Iron ore the laggard in the space, down 10.5% on the day.


The Day Ahead




> AU RBA Ast. Gov. Debelle to speak

> AU September MI Inflation Expectations : 4.4% prev.

> AU September Employment Change & Unemployment Rate : -108.5K & 4.8% exp.

> CN September CPI & PPI : 0.9% & 10.6% exp.

> US September H/line PPI & Core PPI : 0.6% & 0.5% exp.

> US Weekly Unemployment Claims : 315K exp.

> US FOMC members Bostic and Barkin to speak

> US EIA Crude Oil Inventories : 1.1Mio exp.


The focus will be on-shore today, with the AU employment numbers for September in view, although not anticipating major market movement with the data showing the depths of the Delta shutdown’s impact. Chinese inflation numbers will hit the wires mid-day, and with producer prices continuing to soar, the numbers will be in focus yet again as China continues to export inflation to the rest of the world. Commentary from RBA Ast. Gov. Debelle will be first up, and inflation expectations for AU should sing the same tune as the rest of the world. Expecting a move higher back up toward 0.7400 today, with markets finally getting some certainty on what/when a US taper would look like to start planning accordingly.


Range Today : 0.7350 – 0.7420


AUD/USD Technicals


The resilience of the pair continues, showing that the bullish tone gripping the Aussie may have more room to run with the 100DMA at 0.7419 in focus. Expecting to run into some positions around the 0.7400 handle, although a better than expected employment print may see the figure taken with relative ease. Seems to be plenty of support around 0.7320/30 with bias tilted to the upside.

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