AUD: A$ Continues To Underperform Following Disappointing GDP

Gold is 0.4% lower in today’s Asia-Pac session, after closing broadly unchanged at 2736.78 on Monday.

• With the US Presidential Election held later today and the FOMC’s next policy decision on Thursday, market participants appeared content to sit on the sidelines.
• Yesterday, US treasuries rallied, led by the long-end, as the so-called “Trump trade” (bear steepener) was unwound after a poll in Iowa, a typically reliable red state, gave Harris a 3-point lead over Trump. A late swing to Harris was also evident in other weekend polls. However, Polymarket still shows odds that favour Trump to win in today’s US Presidential Election. Political polling in key swing states remains within the margin of error, leaving the race finely balanced.
• According to MNI’s technicals team, the pullback from last week’s record high at $2,790 is considered corrective for now. Last week’s gains resulted in a breach of $2,685.6, the Sep 26 high, confirming a resumption of the primary uptrend. Sights are on the $2,800.0 handle next. Firm support is $2,712.8, the 20-day EMA.

Oil prices have been range trading following Monday’s jump as market moves have been limited ahead of this week’s US election result and Fed meeting. WTI is up 0.1% to $71.52/bbl after falling to around $71.30. Brent is 0.1% higher at $75.18/bbl, close to the intraday high. Yesterday’s weaker greenback supported the rally in crude but today the USD index is flat.

• While risks of an escalation of the conflict in the Middle East persist, this week oil markets are watching the outcome of the US election, which will hopefully be known on Wednesday, the FOMC meeting on Thursday and US inventories with industry-based data on Tuesday and the official EIA on Wednesday. In China, there is October trade data on Thursday and the legislature standing committee is meeting this week, which may result in further stimulus.
• On the supply side, near-term there are risks to Gulf of Mexico production from Tropical Storm Rafael, and further out, another Iranian attack on Israel could result in its oil infrastructure being targeted.
• Later US October services ISM/PMI and September trade print, as well as UK October services/composite PMIs. The eurogroup meeting continues and the ECB’s Lagarde and Schnabel speak.

Broader cross-asset moves are relatively muted so far in Tuesday Asia Pac trade. The Caixin services PMI in China comfortably beat expectations earlier, rising to 52.0 versus 50.5 forecast and 50.3 prior. 

• This should help keep the Citi China data surprise index in an upswing and suggests positive from the recent stimulus measures. Focus is on the current NPC meeting, where reducing the local government debt burden is in focus.
• The Caixin beat has aided onshore equities, with the CSI 300 up over 1% at this stage (but away from best levels). Hong Kong equities are also up, but HSI gains are around 0.50% at this stage.
• USD/CNH is lower, last under 7.1100, but comfortably above Monday intra-session lows. Elsewhere, AUD and NZD are a touch higher, but aggregate moves are modest. The KRW is holding weaker, while USD/JPY is up a touch. As we noted earlier, overnight FX vols have surged ahead of the US election.
• Equity sentiment elsewhere is more mixed, up in Japan but softer in South Korea and parts of South East Asia. US equity futures have edged up, but gains are less than 0.10% at this stage.
• US yields are up a touch, with the back end a little more than 1bps higher, but this follows sharp losses on Monday.   
• Coming up we have the RBA decision, no change is expected, but the language around the outlook and inflation will be in focus.