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Global Market Update
The View from Australia

by Craig Killaby | November 23, 2021



> NZ Q3 Core Retail Sales & H/line Retail Sales : -6.7% & -8.1% v. -7.6% & -10.2% exp.

> AU November Flash Manufacturing & Services PMI : 58.5 & 55.0 v. 58.2 & 51.8 prev.

> EU November German Flash Manufacturing & Services PMI : 57.6 & 53.4 v. 57.0 & 51.4 exp.

> EU November Flash Manufacturing & Services PMI : 58.6 & 56.6 v. 57.5 & 53.6 exp.

> UK November Flash Manufacturing & Services PMI : 58.2 & 58.6 v. 57.2 & 58.6 exp.

> US November Flash Manufacturing & Services PMI : 59.1 & 57.0 v. 59.3 & 59.1 exp.


Overnight Headlines (BBG)

> US President Biden plans to release their oil reserves in an effort to calm rising prices, along with South Korea, Japan, India, UK and China in an unprecedented consumer driven move

What you need to know

With the Federal Reserve nomination out of the way, financial market participants seemed to be looking ahead to what that may mean for policy in the coming months and years. As a result of the re-nomination decision, bond markets seem to be prepping for a faster pace of policy tightening as UST yields continue to move higher across the yield curve with the 2s, 10s, and 30s all rising on the day. The session in Asia was lacklustre, with NZ retail figures beating expectations by falling less than expected, while the AU PMI data failed to raise any eyebrows despite the services sector rebound. Market movement in Asia was minimal in FX, with the move to note coming from USDJPY as pressure from rising US yields saw the currency pair break above the 115.00 level for the first time since March 2017 and adding to the USD strength story. While the heavy drop in the Turkish Lira also saw flows into the Dollar, as the collapse of the TRY continues in 2021.


In Europe, the economy seemed to be on the rebound as expected prior to the recent surge in COVID19 cases across Germany and much of Europe. ECB hawkish commentary on inflation risks being skewed higher was supportive of the euro, rebounding very slightly on the day. Higher US yields have sent some jitters across equity markets, with shares impacted most by rising yields (tech) seeing some losses on the day while the stay-at-home stocks such as Zoom also saw heavy losses (17%) on revenue misses.


Major US indexes dropped on the session, as the S&P500 is down 1% at the time of writing. Commodity markets is where most of the action was seen, as traders prep for the release of oil reserves from heavy consumption countries the price of WTI crude was able to push higher and up 2.3% overnight as the pressure mounts on US President Biden. Higher rates continues to hurt Gold, as the price resumes its fall down 0.8% as Fed rate hike bets hinders appetite for the haven. Iron ore and copper up on the day, with the recovery in the price of iron ore helping local equities with the ASX finishing yesterday up 0.75%


The Day Ahead




> AU RBA Ast. Gov. Bullock to speak (9:15am AEDT & 11:40am AEDT)

> AU Q3 Construction Work Done : -3.0% exp.

> NZ RBNZ Official Cash Rate Decision & Press Conference : 0.75% exp. (0.25% increase exp.)

> EU November German ifo Business Climate : 96.8 exp.

> US Q3 Prelim GDP : 2.2% exp.

> US October H/line Durable Goods orders & Core Durable Goods Orders : 0.2% & 0.5% exp.

> US Weekly Unemployment Claims : 259K exp.

> US October Core PCE Price Index : 0.4% exp.

> US November UoM Consumer Sentiment : 66.8 exp.

> US FOMC Meeting Minutes (6am AEDT Thursday)


A very busy day for markets as the Americans try to squeeze all of the data into a holiday-shortened trading week. Keeping eyes on APAC, RBA speak from Ast. Gov. Bullock may provide something to chew on, although the highlight will be the interest rate decision from the RBNZ. It is expected that the Kiwis will be raising their lending rate yet again, with consensus seen on a 0.25% increase. Risk is that Gov. Orr and the RBNZ deliver a 0.5% increase and we see a surge in the NZD against nearly all the majors.


US data also heavy, with Q3 GDP and Core PCE the highlights ahead of the FOMC meeting minutes tomorrow morning. With inflation running rampant throughout the US, it will be interesting to see if the FOMC’s minutes have a hawkish bias and put further upside pressure on rates.


Range Today : 0.7190 – 0.7255


AUD/USD Technicals


The grind lower continues, with yet another fresh low of 0.7207 seen overnight it seems unlikely that the pair finishes the year on a high with the momentum building in the Dollar. Support around current levels of 0.7225 seems strong, and expect sideways trading for the day ahead of the RBNZ. A higher than consensus hike may see the AUD jump on the lead from the NZD, although expect cross selling to limit the upside.

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