AUD: Asia-Pac - AUD Drifts Higher, 0.6625 Resistance Holding
The AUD/USD has had a range of 0.6552 - 0.6570 in the Asia- Pac session, it is currently trading around 0.6565, +0.20%. The USD has drifted lower in our session after the PBOC delivered a much stronger fix at 7.1048. The AUD could not break above the 0.6625 resistance overnight and fell away pretty easily from there as the USD built on its recent gains. While AUD/USD remains below 0.6625/50 I suspect the risk remains skewed to the down side and sellers will fade bounces initially. First support is back toward 0.6500 but a break below here would signal a deeper correction lower and could see the move accelerate.
- The USD move is beginning to challenge a market that is short but we are approaching some pivotal levels and suspect longer-term investors might see this bounce as an opportunity to fade as weaker hands are forced out.
- Bloomberg reported that Governor Michele Bullock said “Australia’s economy is in a “pretty good spot” with inflation inside the central bank’s 2%-3% target band and the labor market still tight.” speaking in Canberra today.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6545(AUD657m). Upcoming Close Strikes : 0.6500(AUD1.01b Oct 14), 0.6600(AUD943m Oct 14), 0.6650(AUD880m Oct 14) - BBG
- AUD/JPY - Asia-Pac range 100.23 - 100.50, Asia is trading around 100.45. The pair has surged higher for good reason on the election outcome. It has extended its move higher and is looking to build on its break above 100. Dips should now be supported as the focus now turns toward 102.50 and then the 105.00 area.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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CHINA: Bond Futures Lower in Morning Trade
- China's bond futures are down this morning with the 10-Yr leading.
- The 10-Yr is down -0.16 at 107.62 to move further below all major moving averages.
- The 2-Yr is down -0.04 at 102.35 to also move further below all major moving averages.
- The 10-Yr CGB is at 1.79% after last night's close of 1.81%
BONDS: NZGBS: Holding 2-4Bps Firmer, RBNZ To Consult On OMOs
Benchmark NZGB yields how around 2-4bps higher for Wednesday trade. Outside of early yield moves, which followed US gains from Tuesday trade, we have seen quite steady trends through the rest of trade today. The 2yr yield rests at 2.96%, while the 10yr is just above 4.33%, up around 4bps. The 2/10s curve is a touch steeper at +137bps. The 2yr swap rate is down a touch to 2.745%.
- US Tsy futures are a touch weaker so far today, while cash yields are little changed ahead of key inflation data (both this evening and on Thursday).
- The data calendar just had net migration figures for July, not a market mover. We were up +2k and showing some signs of stabilization, with annual migration up to +13k. Still, we are coming from a low base, so further recover is likely needed for this to benefit the economy more broadly.
- The RBNZ announced: "We are consulting on how we conduct Open Market Operations and are seeking input on design considerations for a Committed Liquidity Facility. This consultation builds upon previous work, including speeches and Bulletins given as part of the Liquidity Management Review. Respondents to the consultation may choose to comment on one or both parts of the consultation and whichever questions are relevant to them. This consultation is open until 31 October."
- The data calendar is empty tomorrow, with Friday delivering the Aug PMI, along with card spending figures.
GOLD: Gold Higher Ahead Of US PPI Data
Gold prices are off their intraday low of $3620.47/oz despite the ruling that temporarily blocks President Trump removing Fed Governor Cook. The judge said that possible mortgage fraud was unlikely to be “cause” for dismissal and that the way she was dismissed was against the constitution. With threats to Fed independence recently driving bullion higher, it has not responded to the news. Gold is currently up 0.4% to $3639.0 supported by increased Middle East tensions as well as a lower US dollar (BBDXY -0.1%). US yields are steady.
- Bullion reached a high of $3640.91 early in today’s APAC trading holding below yesterday’s record of $3674.27.
- The FT reported that President Trump told European representatives that he’s prepared to impose the same tariffs as Europe on China and India for buying Russian energy. However, Trump said he had spoken with his “good friend” Indian PM Modi.
- Gold has found support from increased central bank buying with the PBoC purchasing over successive months but Bloomberg reported that RBI is also accumulating and that Czech holdings are at record.
- After falling 1.2% on Tuesday, silver is 0.4% higher today at $41.03. It fell to $40.721 and then recovered to a high of $41.045.
- Equities are rallying with the S&P e-mini up 0.2%, Hang Seng +1.2% and KOSPI +1.5%. Oil prices are higher again with WTI +0.9% to $63.20/bbl. Copper is up 0.4%.
- Later August US PPI data are released and will be watched closely given that a 25bp rate cut is fully priced in for September 17. CPI is out on Thursday. The ECB’s Buch speaks today.
