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Global Market Update
The View from Australia

by Craig Killaby | November 21, 2021

Data/Speakers

 

> UK November GFK consumer Climate : -14 v. -18 exp.

> UK October Retail Sales : 0.8% v. 0.5% exp.

> CA September Core Retail Sales & H/Line Retail Sales : -0.2% & -0.6% v. -1.0% & -1.6% exp.

 

Weekend Headlines (BBG)

> COVID lockdowns have come back to Europe, with Austria announcing they will be imposing a full nationwide lockdown as they head into the winter months

> US politicians continue to debate the new tax/spending plan as the package goes to the US Senate for debate

> US intelligence reports a significant build-up of troops on the border of Ukraine, a signal that the escalation of tensions may be coming to a head

What you need to know

A lacklustre trading session in Asia Friday was overshadowed by some strong movement in both the European and North American sessions, as COVID19 lockdowns in parts of Europe and more hawkish commentary from members of the FOMC saw the USD surge. With little data on the docket on Friday, the AUDUSD traded in a very tight range above the 0.7270 level, and broke to a high of 0.7290 in early London. The move was short lived, with Austria announcing that the impending lockdown will be for all citizens, not just the unvaccinated, and seeing a sharp selloff in the EURUSD down to the 1.1250 level. The Aussie looked heavy heading into the overnight session, with eyes on commentary from Fed Vice-Chair Clarida as inflation angst seems to have made its way into the minds of the Fed leaders, as he acknowledged that the central bank may need to increase the pace of their tapering of purchases in the face of surging inflation.

 

The dollar was stronger on the comments, opening up this morning a touch above the 96.00 level on the DXY dollar index. Tough day for those currencies not named the USD, with the Aussie down 0.5% while the local crosses are all lower with the exception of AUDEUR, which was able to make minor gains on EURUSD underperformance. Risk aversion was the theme, with the AUDJPY and AUDCHF seeing strong losses as investors gear up for what is a big week in terms of headline risk. US equity markets unable to hold on to recent gains, down 0.15% and a touch below the 4700 level on the S&P500 to close out the week. UST yields had a whippy trading day, falling on the announcement of COVID lockdowns and seeing a slight bump post-Fed commentary. Significant movement in commodity markets, with iron ore jumping over 6.4% while copper also gained 2.3%. WTI crude and Gold saw strong moves lower, with oil down a 3.5% as pressure mounts on the Biden administration to take action while Gold is off 0.8%.

 

The Day Ahead

 

Data

 

> EU November Consumer Confidence : -5 exp.

> US October Existing Home Sales : 6.20Mio exp.

 

With a very light data docket today the focus will be on the headlines and the follow through on the heavy news flow of the weekend. Expect it to be a choppy trading day in Asia, as markets position for the announcement of the Fed chair appointment along with the filling of other vacancies at the most important central bank.

 

The dollar looks like it may be poised for a breakout, at the upper end of its recent range. Apart from the RBNZ decision on Wednesday, the focus is on the US as growth numbers, Fed appointments and meeting minutes are all due before the US Thanksgiving holiday on Friday AEDT.

 

Range Today : 0.7220 – 0.7265

 

AUD/USD Technicals

 

After the pair posted a six week low against the Buck, along with the other commodity backed pairs it is on the backfoot on the market open. Choppy trading may see the pair retrace back up towards the highs seen early this morning around 0.7260, the likely target on risk-on tone. A break of Friday’s low of 0.7227 may see momentum build on a continued move below the 0.7200 handle as the Dollar starts to gain traction.

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