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Global Market Update
The View from Australia

by Craig Killaby | November 24, 2021

Data/Speakers

 

> AU Q3 Construction Work Done : -0.3% v. -3.0% exp.

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

> EU November German ifo Business Climate : 96.5 v. 96.8 exp.

> US Q3 Prelim GDP : 2.1% v. 2.2% exp.

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

> US Weekly Unemployment Claims : 199K v. 259K exp.

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

> US October Personal Spending : 1.3% v. 1.0% exp.

> US November UoM Consumer Sentiment : 67.4 v. 66.8 exp.

> US EIA Crude Oil Inventories : 1.0Mio v. -1.7Mio exp.

 

Overnight Headlines (BBG)

> Minutes from the US FOMC November meeting showed that there are discussions around increasing the pace of policy tightening, with inflation risks skewed to the upside as US growth lagged in Q3

What you need to know

The theme of the comeback in the USD continues, with the dollar up against most of the majors as some of the doves in the FOMC turned slightly hawkish in November as inflation angst took over. During yesterday’s Asia session, it was the RBNZ that took the headlines as they raised their benchmark lending rate for the second time in as many meetings as they embark on policy normalization. The 0.25% rate hike disappointed markets, who have become exceedingly hawkish as inflation expectations rise in NZ, the NZDUSD struggled to stay afloat and opens up this morning as one of the worst performers against the USD down 1.15%. AUDUSD sits below the 0.7200 handle for the first time since late September as the dollar surge builds momentum.

 

Europe has not helped risk appetite, as lockdowns start to spread across the region as they deal with the fourth wave of COVID19 and urge citizens to get vaccinated. EURUSD opens up only a tick above 1.1200, and looking poised for yet another break lower. The Americans had a slew of economic data ahead of their Thanksgiving day holiday, as Q3 growth missed expectations while inflation was unable to keep the US consumer from spending as the numbers surprised by exceeded estimates.

 

The Fed’s preferred inflation gauge currently sits at 5% year-on-year, and is likely to influence Fed members at their upcoming decision on the 16th December with employment and CPI numbers all due before the meeting. The FOMC minutes release early this morning showed that some members were ready to increase the pace of the QE taper, while various members were prepared to change their views if the current economic trends continued. The DXY dollar index is up another 0.4%, making the gains in the month of November nearly 3% on the DXY dollar index. Equities sensitive to higher interest rates were shaky at the top, although the S&P500 has been able to edge out slight gains at the time of writing into a choppy close. Commodity markets continue their rebound, with WTI crude prices placing heavy political pressure on President Biden the price remains stable down only a marginal 0.15%. Base metals continued their rebound with copper up 0.9% while iron ore breaks higher up near 8% on the day.

 

The Day Ahead

 

Data

 

> NZ October Trade Balance : -1.575bio exp.

> AU Q3 Private Capex : -1.9% exp.

> EU November German GFK Consumer Climate : -1.0 exp.

> EU ECB President Lagarde to speak

> UK BOE Gov. Bailey to speak

> US Bank Holiday – Thanksgiving

 

With the US kicking off their holiday, expecting a significant thinning of volumes heading into the end of the week. NZ trade figures are not expected to move the needle, although a stronger print may see the NZD recover from its over 1% selloff. Q3 AU GDP partials hit the wires this morning as investors start to piece together what next Wednesday’s Q3 print will have to offer. Expecting this morning’s hawkish Fed minutes to put further pressure on the AUD and NZD today, as it becomes less appetising to hold riskier assets heading into a pivotal period of policy shifts.

 

Range Today : 0.7170 – 0.7225

 

AUD/USD Technicals

 

After the initial bounce on the psychological support seen at the 0.7200 mark, this morning’s Fed minutes saw the pair break through and post multi month lows of 0.7184. Support seen at 0.7190 looks weak in early trading, which brings the downside target of 0.7170 into focus. Reversals will be targeting the 0.7225 level on their way back to the 0.7200-middle, however lower highs is likely to be the theme heading into the EOY.

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