FOREX: Early Trends Favor USD, But Aggregate Moves Limited
Early G10 FX trends are skewed modestly in favor of the USD, but aggregate moves are modest. The USD BBDXY index is little changed, last near 1314.2.
- AUD and GBP are off a little over 0.10% at this stage, but both currencies remain within recent ranges. AUD/USD was last 0.6180/855, GBP near 1.2200. EUR/USD is hovering close to 1.0300. USD/JPY is little changed, hovering near 158.00.
- In the cross asset space, US equity futures are up a touch, while regional equity markets, which are open, are mostly tracking higher. US yields sit down a touch, but looses are not much beyond 1bps at this stage.
- NZD/USD is back to 0.5600, down slightly for the session. Onshore yields continue to push higher, extending yesterday's recovery. Earlier data from the Westpac/McDermott Miller employment confidence index highlighted: "Employment confidence picked up by 2.4 points to 91.6 in the December quarter, led by an improvement in perceptions of job availability."
- There is little in the way of further data outcomes/risks events for Asia Pac markets. Focus is firmly on the upcoming US CPI print.
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AUDNZD: AUD/NZD Steady, Holds Above All Key EMAs
- The AUD/NZD has been trading sideways for the past few session, rising off the monthly low of 1.0933 following the stronger-than-expected AU employment last week. The cross is trading little changed this morning at 1.1035.
- Looking at technicals, the cross is trading above all key moving averages, the RSI is at 53 having held steady over the past few sessions, while the MACD indictor is now neutral after printing negative bars for the past few weeks. 1.1100 is key resistance, with the cross only able to briefly break above that level once since July, support is seen at 1.1024 (20-day EMA), with the monthly lows of 1.0933 seen as key support.
- Focus for the cross this week will be on AU Westpac Consumer Confidence tomorrow, followed by NZ GDP on Thursday.
- The AU-NZ 2yr swap has edged back higher of the past few session to +38bps from +26bps.
- There are some large expiries today - 1.1100 ($578m) 1.1050 ($738m), 1.0800 ($468m)
Chart. AU-NZ 2yr Swap vs AUD/NZD
RBA: New Monetary & Governance Boards Announced, Will Start In March
Legislation was passed earlier this month to allow for both monetary policy and governance Boards. RBA Governor Bullock requested that there was continuity on the former for policy setting and that seems to be the case with only two new members, which have been named as Professor Fry-McKibbin, a monetary policy specialist, and former Bendigo Bank head Baker. The new structure will begin from March 2025 and so will be in place for the March 31-April 1 meeting.
- Fry-McKibbin was on the panel that completed the RBA review and recommended that the central bank have two boards to allow for more economics experience in setting policy.
- Baker was head of Bendigo and Adelaide Bank until this year and the deputy of the Australian Banking Association.
- Harper, Watkins, Ross and Hewson will remain on the monetary policy board with RBA Governor Bullock, Deputy Governor Hauser and Treasury Secretary Kennedy.
- Existing Board members Schwartz and Rubin will move across to the new governance board and the past Business Council head Westacott, law firm Gilbert+Tobin chair Gilbert, Xero chair Thodey and ex-banking exec Dave are the new appointees. Bullock will chair the board with Schwartz as deputy.
JAPAN DATA: Core Machine Orders Firmer, Supporting Capex Backdrop
We had a decent upside surprise to Oct core machine orders, which rose 2.1%m/m, versus 1.1% forecast and -0.7% prior. The y/y outcome was 5.6%, against a 1.0% forecast and -4.8% prior.
- The data paints a supportive picture for capex, although the broader, quarterly measure, has generally been running at a firmer pace relative to core machine orders in recent years, see the chart below.
- We also had a resilient capex intentions update from last week's Tankan survey.
- The detail of the machine orders print showed broad based strength. Total orders were up 21.1% m/m. Manufacturing and non-manufacturing rose strongly.
Fig 1: Core Machine Orders & Japan Capex Y/Y
Source: MNI - Market News/Bloomberg
