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Global Market Update
The View from Australia

Craig Killaby January 23, 2019



> NZ Q4 CPI : 0.1% v. 0.0% exp.

> AU January MI Leading Index : -0.2% v. -0.1% exp.

> JP December Trade Balance : -0.18T v. -0.29T exp.

> JP BOJ Policy Rate Decision : -0.10% & -0.10% exp.

> CA November Core Retail Sales & Retail Sales : -0.6% & -0.9% v. -0.4% & -0.6% exp.


Overnight Headlines (BBG)


>  House Democrats are preparing to send Trump a proposal to boost border security — but not build a wall — by spending more than the $5.7 billion he wants for the wall, according to a Democratic aide

>  The White House said that if the partial government shutdown extends through March, there’s a chance of zero economic expansion this quarter


What you need to know


It was a relatively quiet day for local traders, with the AUD stuck in a very tight range just above the 0.7100 figure. With no local data on the docket the Aussie was buoyed by some CNH strength, touching a high of 0.7144 mid-day and trading sideways until we opened back up this morning. The Bank of Japan kept their policy unchanged, with significant stimulus still needed by the central bank to maintain their current inflation levels. In terms of data, the highlight came from Canada as worse than expected retail sales for November sent the CAD down a touch against the sliding Dollar. The losses for the DXY came in large part from the strong performance by the GBP and EUR on the back of some positive Brexit developments. UK MPs looked to edge closer to an extension of the impending deadline of March 29th to leave the EU, seeing the GBP reach the highest level against the Dollar since November 8th up 0.9% for the day.  EUR benefiting from the positive developments, able to eek out a small gain of 0.2%. UST yields were up across the curve, with the 10y yield leading the charge up near 5bp and the 2y just a touch behind up 2.9bp. US equity markets were able to finish the day higher, with the S&P500 up 0.2%. Little movement on the commodity from, with WTI crude down 1.5% and Iron Ore/Copper also down. Gold down 0.2%.


The Day Ahead




> AU January Flash Manufacturing PMI & Services PMI : 54.0 & 52.7 exp.

> AU December Employment Change & Unemployment Rate : 17.3K & 5.1% exp.

> EU January Flash Manufacturing PMI & Services PMI : 51.5 & 51.5 exp.

> EU ECB Main Refinancing Rate & ECB Press Conference : 0.00% exp.

> US Unemployment Rate : 219K exp.


The highlight for the data week will come today as the employment figures for the December are released. Prior to this local traders will get some flash PMI numbers, however not expecting much movement prior to the release at 11:30 AEDT and direction likely to come following the print. The numbers would have to be much better than anticipated (sub 5% unemployment rate) to break the recent range, however a miss could see the bears take control and send the Aussie on a tumble. Overnight in the US the government shutdown conversation continues to roll on, as the longer it goes the more concerning it gets for the Q1 GDP in the US.


Range for the day : 0.7120 – 0 .7180


AUD/USD Technicals


We are starting to see some consolidation above the 0.7100 level, with the bears trying to take hold and send the AUD lower through support at 0.7116 and 0.7078. Unlikely to have much change to the technical picture prior to this morning’s employment number, with a break and hold above the 0.7207 and 0.7235 levels needed to build some bullish momentum.


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