AUD: AUD/USD - Extends Higher To Test Important 0.6700 Area
The AUD/USD had a range overnight of 0.6666-0.6700, Asia is trading around {AUDUSD Curncy}. The AUD extended its move higher rising to challenge the 0.6700 area as risk has built on its recent gains and a strong GDP print added tailwinds to the Santa Rally. The AUD price action remains constructive as the pair looks to build the momentum to try and break above the 0.6700 area. Technically while the AUD remains above 0.6500-0.6550 dips should continue to be supported. In the Asian session, focus will be around the attempt to break back above 0.6700, the AUD does look a little stretched short-term but with risk powering ahead and liquidity not what it would normally be a move higher is possible. I would prefer to fade dips again with the first support on the day 0.6645-0.6665.
- Bloomberg - “The US economy grew at its fastest clip in two years, with a 4.3% annualized advance in the third quarter bolstered by resilient consumer and business spending, as well as calmer trade policies. The report did little to alter bets the Fed won’t be cutting rates any time soon.”
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6700(360m Dec29) - BBG
- The AUD/USD Average True Range for the last 10 Trading days: 41 Points
Fig 1: AUD/USD spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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RATINGS: Moody's Upgrades Italy To Baa2 From Baa3, Still A Notch Below Others
The Moody's upgrade to Italy's credit rating announced late Friday was the first from the agency since 2002 but shouldn't be considered a major surprise. Among the 3 major ratings agencies, Moody's had the lowest rating on Italy - by two notches (Fitch and S&P both BBB+).
- So this upgrade to Baa2 from Baa3 represents something of a closing of that gap rather than a major breakthrough for Italy.
- From the release:
- "The rating upgrade reflects a consistent track-record of political and policy stability which enhances the effectiveness of economic and fiscal reforms and investment implemented under the National Recovery and Resilience Plan (NRRP). It also points to prospects of further policy actions supporting growth and fiscal consolidation beyond the plan's deadline in August 2026. As a result, we expect that Italy's high government debt burden will gradually decline from 2027 onwards."
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On the asset side of the Fed balance sheet, we saw a $25B drop in assets, of which just $2B could be attributed to QT in one of its final weeks (ends Dec 1).
- Instead it was a $6B drop in dealer repo operations vs a week earlier, and $17B in "other" areas that aren't related directly to monetary policy and typically don't have any significant impact on the size of the balance sheet (such changes are largely due to items such as bank premises, accrued interest, and other accounts receivable.)
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- QT has totaled just under $21B over the last month, around the expected pace, though as noted this will flatline in December with a pickup in net bills as MBS proceeds are rolled over into T-bills.
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A Thanksgiving-condensed week sees data highlights from delayed retail sales and PPI reports for September on Tuesday (Nov 25) before a Wednesday release for weekly jobless claims (Nov 26). Aside, the Fed’s Beige Book should also offer another important update on Wednesday for latest liaison reporting, with no Fedspeak currently scheduled around the holiday and the FOMC media blackout due to start on Saturday, Nov 29.
- As we regularly comment in this weekly publication, Redbook and Chicago Fed CARTS indicators point to solid nominal growth in retail sales, something broadly reflected in analyst consensus for the release.
- PPI inflation will offer a useful albeit not overly timely update on input cost pressures.
- Jobless claims will be watched particularly closely, both for latest initial claims for signs of layoffs and a notable update for continuing claims. The latter covers the payrolls reference period for November and will be an important reference point for FOMC members trying to get a sense of latest unemployment rate clues with the next payrolls reports coming after the Dec 9-10 FOMC decision (going into it with this week’s 0.12bp rise to 4.44% back in September).
