FOREX: AUDNZD Fades Hard, GBP Outperforms on Better Fiscal Picture
Oct-16 09:30
- AUDNZD faded hard today. AUD slipped overnight, pushing prices below the 0.6500 figure following a very poor employment report. Both the employment change headline and unemployment rate were weaker than expected, while the August release was marked lower in the first revision. This put the unemployment rate at a 4 year high, forcing markets to consider an accelerated pace of RBA rate cuts going forward.
- Cementing the theme, local desks note some potential position squaring and profit-taking in AUDNZD which could be putting the mullti-month uptrend at risk. NZDUSD is off highs, but remains higher by ~0.2% in early trade. As such, the price hasn't managed to break above Monday's high at 0.5759.
- As a November RBA cut is becoming more likely, AUDNZD lost 0.4% on the session at 1.1337. AU-NZ 2yr swap rates are not implying further sharp AUDNZD downside - despite the recent run higher in the cross. Monday's Q3 NZ CPI will be the next key input.
- GBP modestly outperforms. UK August activity data was broadly inline and is unlikely to have any real impact on the next BoE decision, however Gilt futures have steadied as markets see marginally less fiscal tightening required at the November Autumn Budget than many envisage, particularly as the Chancellor signalled that taxes on the wealthy will be “part of the story”. EURGBP is lower for a second session, again proving the resilience of the 0.8676 as a key anchor level.
- Tomorrow's negotiations between Japanese LDP and Ishin parties will be the next leg in LDP leader Takaichi's attempt to be elected as the next PM next Tuesday following the failure of leader-level discussions earlier today. Ishin leader Fujita said today they will decide by Monday whether or not to join a coalition, meaning the day could prove decisive for Takaichi's fate, her expansionary agenda, and subsequently, USDJPY trends in the short- to medium term.
- Today was originally set to see the concurrent release of retail sales, PPI and weekly jobless claims from the US, but the extended government shutdown (which the Treasury now estimate is costing the US economy ~$15bln per day) will delay these releases. Instead, alternative measures remain of primary focus - keeping the Philly Fed Business Outlook and New York Fed Services Business Activity data in the spotlight.
- In central bank speak, Fed's Waller, Barr, Miran, Bowman & Kashkari are all due to speak as FOMC members look to set the tone before the pre-meeting media blackout kicks in at tomorrow's close. BoE's Mann & Greene and ECB's Wunsch, Lane and Lagarde all appear at the IMF/World Bank Forum in Washington DC.
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GILTS: Back From Highs After Soft Auction
Sep-16 09:29
{GB} GILTS: Soft demand at the latest 15-Year auction sees gilts away from session highs.
- Futures back to ~91.50.
- A bullish cycle remains in play. Initial resistance at 91.82. Initial support at 90.65.
- Yields 1.5bp higher to 0.5bp lower, curve twist flattens.
- Modest hawkish adjustment in GBP STIRs, SONIA futures flat to -1.0, BoE-dated OIS pricing ~7.5bp of cuts through year-end, aided by the qauntiy side of the labour market readings.
- We don’t think this morning’s data will be gamechanger for the BoE, particularly with wage data slightly softer than expected at this early stage in the Q3 cycle (see our earlier run of post-data bullets for more colour).
- A reminder that we have CPI data tomorrow ahead of the BoE decision on Thursday (full CPI preview here).
- Focus following Thursday’s BoE decision is likely to fall on the QT announcement for 25/26, with consensus looking for no change in Bank Rate.
- We argue that either active gilt sales continuing at their current pace or being suspended completely would be the optimal position for the market.
- U.S. President Trump’s state visit is set to provide headlines over the next 48 hours, with U.S. firms outlining increased investment intentions re: the UK in recent days.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Sep-25 | 3.976 | +0.9 |
Nov-25 | 3.935 | -3.2 |
Dec-25 | 3.893 | -7.4 |
Feb-26 | 3.786 | -18.1 |
Mar-26 | 3.754 | -21.4 |
Apr-26 | 3.683 | -28.4 |
SLOVAKIA AUCTION RESULTS: SlovGB Results
Sep-16 09:26
| Coupon | 3.625% | 3.75% | 0.375% | 4.00% |
| Maturity | Jun-33 | Feb-35 | Apr-36 | Feb-43 |
| Instrument | SlovGB | SlovGB | SlovGB | SlovGB |
| ISIN | SK4000023230 | SK4000022539 | SK4000018958 | SK4000022547 |
| Amount | E97mln | E229mln | E81mln | E105mln |
| Previous | E163mln | E190mln | E150mln | E219mln |
| Avg yield | 3.186% | 3.418% | 3.538% | 4.040% |
| Previous | 3.268% | 3.431% | 3.511% | 3.981% |
| Bid-to-cover | 5.09x | 4.30x | 3.72x | 3.85x |
| Previous | 1.80x | 4.90x | 2.95x | 1.96x |
| Avg Price | 102.953 | 102.628 | 72.462 | 99.487 |
| Low Price | 102.770 | 102.575 | 72.369 | 99.266 |
| Pre-auction mid | 102.659 | 102.167 | 72.163 | 99.047 |
| Prev avg price | 102.473 | 102.578 | 70.915 | 100.232 |
| Prev low price | 102.410 | 102.578 | 70.854 | 100.095 |
| Prev mid-price | 102.510 | 102.051 | 70.469 | 99.844 |
| Previous date | 16-Jun-25 | 16-Jun-25 | 18-Nov-24 | 20-Jan-25 |
EURUSD TECHS: Bullish Theme Remains Intact
Sep-16 09:25
- RES 4: 1.1923 2.00 proj of the Feb 28 - Mar 18 - 247 price swing
- RES 3: 1.1851 High Sep 10 2021
- RES 2: 1.1829 High Jul 01 and the bull trigger
- RES 1: 1.1811 Intraday high
- PRICE: 1.1807 @ 10:25 BST Sep 16
- SUP 1: 1.1694/43 20- and 50-day EMA values
- SUP 2: 1.1574 Low Aug 27
- SUP 3: 1.1528 Low Aug 5
- SUP 4: 1.1392 Low Aug 1 and bear trigger.
The trend theme in EURUSD remains bullish. Resistance at 1.1743, the Aug 22 high, has recently been cleared reinforcing a bull cycle. Today’s gains have resulted in a climb above 1.1789, the Jul 24 high, exposing 1.1829, the Jul 01 high and bull trigger. Clearance of this hurdle would confirm a resumption of the primary uptrend. Support to watch is the 50-day EMA, at 1.1643. A clear breach of it would signal scope for a deeper retracement.
