AUD: A$ Continues Downtrend Following Disappointing GDP Data

European LNG prices rose 3.4% on Monday to EUR 40.52 as demand rose due to a drop in wind-generated power, which is expected to continue this week. It was also supported by positive sentiment for energy after OPEC delayed its gradual normalisation of oil output. 

• European storage is high at above 95% full and while imports have been lower for this time of year, they continue to arrive from the US, Qatar and North Africa, according to Italy’s Eni SpA. There are still risks around year-end when an agreement for Russian gas to flow through Ukraine expires but talks are progressing with Azerbaijan as an alternative route.
• If Iran follows through on its plan of a “strong and complex” strike on Israel, then its oil facilities may become targets. It would also heighten the risk to the Strait of Hormuz and Qatar’s LNG shipments.
• US natural gas rose 4.7% to $2.79 as October’s sharp fall in prices encouraged buyers into the market.
• Warmer weather has weighed on prices in the US, but Tropical Storm Rafael has the potential to disrupt oil and gas production in the western Gulf of Mexico, according to Bloomberg. Forecasts for mid-November in western and central US are for lower temperatures, while the east stays above average, according to Commodity Weather Group. 

In local morning trade, NZGBs are 1bp cheaper despite a strong rally by US tsys ahead of today’s US Presidential Election. The US 10-year yield dropped 9bps to 4.29% while the 2-year finished 4bps lower.

• “Households have reduced their discretionary spending and businesses have put investment plans on hold,” the RBNZ said in its semi-annual Financial Stability Report published today. “While business confidence is recovering as inflation and interest rates fall, significant further weakening in the economy remains a risk.”
• Swap rates are 1-2bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is flat to 2bps firmer for 2025 meetings. A cumulative 97bps of easing is priced by February, with 56bps by year-end.
• Today, the RBA will announce its policy decision. While the cash rate is unanimously expected to remain at 4.35%, the meeting statement will be closely analysed for any shifts in tone. A dovish interpretation may arise if the forecasts suggest that underlying inflation could hit the target sooner than the current expectation of Q4 2025.
• Looking further ahead, the FOMC decision is unusually on Thursday amid an otherwise light US economic calendar.

NZD/USD sits comfortably off intra-session highs from Monday in early Tuesday dealings. The pair last near 0.5970/75, set for a modest 0.15% gain, the weakest performer in the G10 space, with all of the majors firmer against the USD. The BBDXY index is tracking a little over 0.40% down for Monday's session.  

• Intra-session highs from Monday were at 0.6015, which was still short of the 20-day EMA, which is near 0.6040. Recent lows rest at 0.5940.
• In the cross asset space, US yields were sharply lower in Monday trade, the 10yr down 9bps to sub 4.29%. Data was close to expectations, but the US election remains the key near term focus. This helped keep the USD lower against the majors. In the equity space, offshore markets were down modestly, SPX down 0.28%.
• Locally, we have already had the RBNZ Financial Stability Report, where "risks to New Zealand’s financial system remain contained, Deputy Governor Christian Hawkesby says". Concerns around the economic backdrop remain though. There will be a press conference later.
• We also have the ANZ NZ commodity price index for Oct out a little later.
• The AUD/NZD cross remains firmer, but at 1.1025 is sub recent highs near 1.1100. The RBA decision is seen steady.