AUD: AUD/USD - Holds Above 0.6600, Even With A Stronger USD
The AUD/USD has had a range today of 0.6598 - 0.6611 in the Asia- Pac session, it is currently trading around 0.6610, +0.15%. The AUD/USD has tried to push above 0.6600 in our session but without much follow through as China pushes back aggressively on the relentless USD selling which put a bottom under it in Asia. The AUD price action remains constructive and indicative of a market with solid buying interest as it pushed through the 0.6580 pivot area overnight. On the day, I suspect dips back toward the 0.6560-0.6580 area could now be supported. The AUD is now looking to build some momentum to once again test the top end of its recent range, first target 0.6630 and then 0.6700.
- MNI AU - Consumer Recovery In Place, RBA On Hold. October household spending is another piece of data signalling robust domestic demand in Australia after Q3 showed it rose 1.2% q/q. With Governor Bullock saying yesterday that the output gap has likely closed, this strength on the demand side is another reason for the RBA to be on hold beyond the 9 December decision given that inflation is above the top of the band.
- MNI AU - AU-US 10Y Diff Extends Push Beyond Old Trading Range: Cash ACGBs are 2-4bps cheaper today, with the AU-US 10-year yield differential at +59bps
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6475(AUD357m), 0.6490(AUD710m). Upcoming Close Strikes : 0.6475(AUD814m Dec 8 ), 0.6500(AUD1.11b Dec 5), 0.6635(AUD651m Dec 9) - BBG
- The AUD/USD Average True Range for the last 10 Trading days: 36 Points
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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JPY: Asia-Pac: USD/JPY - Official Jaw-Boning Sees It Pull Back To 154.00
The USD/JPY range today has been 154.06 - 154.48 in the Asia-Pac session, it is currently trading around 154.10, +0.05%. The pair remains well supported thanks to a combination of a hawkish FED and a BOJ that is still unsure about when it will raise rates. We are testing some resistance around the 154/155 area and I would expect we might to do some work around here initially. A sustained break back above 155 could see the move begin to accelerate and with that the potential for a new round of intervention, though personally I think they will wait for levels closer to 160 to get involved. Look for dips to continue to be supported while above 149-150, the first buy zone is back toward the 152.00 area.
- Yen comments by the FinMin today show FX remains a close watch point for the authorities. Still, based on historical remarks, the comments suggest concern, but not yet suggesting intervention is imminent.
- Options : Close significant option expiries for NY cut, based on DTCC data: 152.50($1.42b). Upcoming Close Strikes : 150.00($1.13b Nov 3) - BBG.
Fig 1 : USD/JPY Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE BONDS: Little Reaction To RBA Decision To Leave Cash Rate Unchanged
ACGBs (YM -1.0 & XM -1.5) are little changed after leaving the cash rate at 3.60%, as unanimously expected.
- The RBA Board decided to keep the cash rate unchanged, noting that inflationary pressures persist amid recovering private demand and a still-tight labour market.
- Although financial conditions have eased, the Board expects the impact of earlier rate cuts will take time to materialise.
- Citing more persistent inflation and heightened uncertainty, it chose to remain cautious and data dependent. The Board reaffirmed its commitment to price stability and full employment, saying it will adjust policy as needed based on developments in the global economy, domestic demand, inflation, and the labour market.
- Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's modest sell-off
- Cash ACGBs are 1bp cheaper with the AU-US 10-year yield differential at +24bps.
- The bills strip is -1 to -3 across contracts.
- RBA-dated OIS pricing had implied just a 3% probability of a move today. As it currently stands, the OIS market has a 75% chance of a 25bp cut by mid-2026.
- The AOFM plans to sell A$1200mn of the 4.25% 21 March 2036 bond on Wednesday and A$800mn of the 3.00% 21 November 2033 bond on Friday.
AUD: Asia-Pac - AUD/USD Drifts Lower After RBA
The AUD/USD has had a range today of 0.6518 - 0.6541 in the Asia- Pac session, it is currently trading around 0.6525, -0.20%. The RBA held rates and the AUD/USD slipped a few spreads lower with the market perhaps looking for a more hawkish RBA. The AUD/USD is firmly back within its recent 0.6400-0.6650 range with the pivot between 0.6500-0.6550 finding some demand first up.
- The RBA is clearly still concerned with inflation and the data going forward now will be critical as this line in the statement suggests. "Given this, and the recent evidence of more persistent inflation, the Board judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve."
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6625(AUD 944m). Upcoming Close Strikes : 0.6500(AUD822m Nov 7), 0.6600(AUD682m Nov 7) - BBG
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
