AUD: AUD/USD - Treading Water Just Below 0.6650
The AUD/USD has had a range today of 0.6629 - 0.6647 in the Asia- Pac session, it is currently trading around 0.6640, -0.05%. The AUD/USD has drifted lower today with risk on the backfoot in Asia ahead of the FOMC. US yields continue to rise, the 10-Year is approaching the pivotal 4.20% area as we come closer to the FOMC. The AUD price action remains very constructive and it continues to ignore the pullback in the USD for now. While the AUD remains above 0.6500-0.6550 I suspect dips should continue to be supported. In the Asian session, watch to see if price can continue to hold above 0.6620-0.6630 to rebuild momentum to have another look back toward the 0.6700 area at some point. If that support does not hold I suspect bids will return back towards the 0.6570-0.6600 area. The AUD outperformance is being expressed more clearly in the crosses.
- MNI AU - Nov Unemployment Rate Forecasts Split Between Rise & Unchanged: With the RBA saying this week that “recent data suggest the risks to inflation have tilted to the upside, but it will take a little longer to assess the persistence” and noting signs of capacity pressures, the data before the 4 February decision will be key to the policy outlook. This begins with Thursday’s November job figures. The RBA doesn’t just look at the headline employment and unemployment but also the underemployment & youth unemployment rates as well as hours worked. The split between full-time and part-time will also be important.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD822m). Upcoming Close Strikes : 0.6550(AUD1.59b Dec 11), 0.6650(AUD767m Dec 12) - 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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GOLD: Gold Rallies On Hopes US Data Releases Will Clarify Fed Outlook
Gold has rallied 1.3% to $4054.0/oz today despite a slightly stronger US dollar, higher yields and a 0.7% rise in the S&P e-mini. It appears to be a delayed reaction to the softer-than-expected November Uni of Michigan consumer sentiment released on Friday. The move may also be in anticipation of the delayed US data printing softer following reports that a deal has been reached to end the US government shutdown impasse. Thus increasing expectations of further Fed easing.
- Gold broke above initial resistance at $4046.2, 31 October high, opening up $4161.4, 22 October high. It reached a high of $4055.50 but has mainly traded around $4040-4050.
- News from the US says that enough Democrats in the senate will vote to pass a bill to end the government shutdown which is in its sixth week.
- Fed Chair Powell said another rate cut in December is not a given and so the market has around a 60% chance of one priced in with 100% by January. Monetary easing supports non-interest bearing gold.
- The PBoC built its gold reserves in October for a twelfth consecutive month, according to Bloomberg. There was an 8% y/y fall in gold consumption in China in the year to September according to the Gold Association.
- Silver is 1.8% higher at $49.18 but has been unable to break above initial resistance at $49.456, 23 October high. It reached $49.299 earlier.
- Later the Fed’s Daly and Musalem speak as well as BoE’s Lombardelli. There are no material data releases.
AUD: Asia-Pac: AUD/USD Builds On Support As Risk Turns Higher, Eyes 0.6550
The AUD/USD has had a range today of 0.6483 - 0.6522 in the Asia- Pac session, it is currently trading around 0.6520, +0.40%. A combination of what looks like the end of the US shutdown and better China Inflation data has seen the AUD trade with a clear bid tone to start the week. The AUD/USD has found support and bounced nicely off the 0.6450 area. If risk continues to build on this change in sentiment expect the AUD to remain supported, resistance is around the 0.6550 area. A break above 0.6550 is needed to turn the focus back toward the 0.6650/0.6700 area.
- "SENATE HAS VOTES TO ADVANCE BILL TO END SHUTDOWN" - BBG
- China Inflation: Over the weekend, we had Oct inflation data, which was stronger than expected. Notably, CPI rose 0.2%y/y, against a -0.1% forecast and -0.3% prior outcome. PPI deflation remained at -2.1%y/y, but was a slight improvement on the Sep outcome. On a monthly basis, CPI rose 0.2%, edging up from September's 0.1% growth. Core CPI, which excludes food and energy, rose 1.2% from September's 1.0%, marking the sixth consecutive month of increase and reaching its highest level since Mar 2024
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6560(AUD447m), 0.6615(AUD 464m), 0.6630(AUD462m). Upcoming Close Strikes : 0.6500(AUD1.22b Nov 12), 0.6530(AUD882m Nov 12)- BBG
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
BONDS: Bear-Steepener, NZ-AU 10Y Diff Lowest Since 2020
NZGBs closed showing a modest bear-steepener, with benchmark yields flat to 2bps higher.
- NZGBs outperformed their $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials 2bps and 4bps tighter, respectively.
- At -29bps, the NZ-AU differential is at its lowest since 2020. (see chart)
- Swap rates closed flat to 2bps higher.
- RBNZ dated OIS pricing closed little changed across meetings. 28bps of easing is priced for November, with a cumulative 37bps by February 2026.
- Tomorrow, the local calendar will see the RBNZ's Inflation Expectations data.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$150mn of the 4.25% May-34 bond and NZ$50mn of the 5.00% May-54 bond.
Bloomberg Finance LP
