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Global Market Update
The View from Australia

Craig Killaby January 29, 2019



> NZ December Trade Balance : 264M v. 225M exp.

> AU December NAB Business Confidence & Business Conditions : 3 & 2 v. 3 & 13 prev.

> US January CB Consumer Confidence : 120.2 v. 125.0 exp.


Overnight Headlines (BBG)


>  Theresa May called on Parliament to send a unified message to Brussels to rip open the Brexit agreement or watch chaos unfold

as the U.K. splits away from the bloc without a deal

>  U.S. Treasury Secretary Steven Mnuchin said the U.S. is focused on “fair economic practices” in trade negotiations with



What you need to know


It was a poor start to the trading week for the Aussie, as the sharp drop in the NAB business conditions survey sent the AUD tumbling against the USD and touching a fresh low of 0.7138 in the process. Overnight, all eyes were on the UK as Parliament voted on a wide range of amendments to May’s Brexit plan as the deadline approaches. With quite a few amendments being voted on, it was a rare win for the embattled PM as she was able to get the go-ahead through the ‘Brady Amendment’ to renegotiate the Irish backstop and gives May the OK from Parliament to head back to the EU to work on a new deal. The GBP whipsawed throughout the overnight session, finishing the day 0.7% weaker against the Greenback likely due to the amendment to extend the deadline being voted down. It was a relatively quite day in the US in terms of data, with markets readying for the Fed’s first rate decision of 2019 and any clues from Powell and company as to what to expect for the rest of the year. Currently futures are pricing in a 20% chance of a hike to come in July, although unlikely for the Fed to move for the year. Trade talks between the US and China kick off tonight, with US Treasury Secretary Mnuchin stating that everything is on the table as the very important talks begin. UST yields fell across the curve ahead of tomorrow’s Fed decision, with the 10s leading the fall down 4bp. US equity markets down on the day, seeing the S&P500 finish 0.15% in the red. Good day on the commodities front, with most major indices up on the session. WTI crude continuing its whippy manner, up 1.8% ahead of this evenings EIA report this evening. Gold up 0.6%.


The Day Ahead




> AU Q4 CPI & Trimmed Mean CPI : 0.4% & 0.4% exp.

> EU December German Import Prices : -0.8% exp.

> US January ADP Non-Farm Employment Change : 170K exp.

> US EIA Crude Oil Inventories : 8.0M prev.


After NAB’s poor business conditions/confidence survey yesterday the AUD seems to be ready for a break lower on some negative data. With the grumblings of an RBA rate cut that perked up last week post NAB’s increase on mortgage rates likely keeps the upside on the Aussie limited until the trade dispute between the US/China is resolved. Ahead of next week’s RBA meeting, the CPI report today will be all important for the central bank to begin their deliberations. A miss on this report would likely send the AUD on a quick path lower, with a beat signalling a run back up towards the 0.7200 level (although not much higher than that). Headline watching in the US tonight, with trade headlines likely driving sentiment for the time being. The Brexit situation continues to develop, expect a lot of volatility with GBP pairs until the end of March deadline.


Range for the day : 0.7085 – 0.7210


AUD/USD Technicals


No reason to change the technical picture, with the AUD sitting near the lower end of the range ahead of this morning’s CPI data. Expecting a break higher/lower after the data release, with RBA in clear focus to set the path for 2019. Resistance seen just above the 0.7200 level, and a break above the 0.7247 (Dec 18 high) needed to change to a bullish bias. The AUD is holding above support at the 0.7149 level, with a break lower leaving the pair vulnerable to downside all the was until 0.7076 and last week’s low.


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