EM ASIA CREDIT: Hindustan Petroleum (HPCLIN): Ratings affirmed

The focus of the week will be firmly on Wednesday’s RBNZ decision which will be accompanied by updated staff forecasts and a press conference, the last from acting governor Hawkesby. A 25bp rate cut to 2.25% is widely expected with only 2/24 analysts on Bloomberg forecasting 50bp. The new governor, Anna Breman from Sweden’s Riksbank, takes over from 1 December. 

• The RBNZ decision is usually followed by a number of public appearances from MPC members. The schedule is yet to be released.
• Q3 real retail sales print on Thursday and are forecast to follow Q2’s 0.5% q/q rise with +0.6%.
• November ANZ business confidence and business activity outlook are also out on Thursday. The survey has been consistent with a gradual recovery and while the price/cost components are elevated they have stabilised.
• On Friday, ANZ November consumer confidence is released. It fell 2.3% in October and has not been able to hold a move above the breakeven 100-mark for more than a month since Q3 2021.
• October filled jobs are also on Friday and will be the first data on the labour market for Q4. It signalled that employment had stabilised in Q3 but the RBNZ will be looking for it to improve to begin absorbing excess capacity in the labour market. 

The Friday night range was 1.1495 - 1.1517, the Cross is dealing in Asia around 1.1510. The Cross found some bids just below the 1.1500 area on Friday night. This 1.1500-1.1600 area remains tough resistance and we are seeing the first signs of the upward momentum stalling. A sustained move back above 1.1600/50 and the market will start to get bulled up again as the focus will turn toward the 1.2000 area and beyond. I have been a little wary of NZD positioning as the market got extremely beared up, the recent price action does suggest we are seeing signs of the NZD underweight being pared back. The risk into the RBNZ this week is they are not dovish enough which could provide short-term headwinds to some of the weaker hands. It will take a little more than that though to discourage the longer-term cross bulls though who have been in full control, I suspect a decent dip will remain well supported back toward 1.1250-1.1350 at first asking. 

• The AUD/NZD Average True Range(ATR) for the last 10 Trading days: 55 Points

Fig 1: AUD/NZD spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

European gas fell 2.8% to EUR 30.30 on Friday off the low of EUR 30.307, to be its lowest in over a year and half despite storage falling to 79.1% from around 83% at the start of November. Prices fell 3% over last week with the US announcing it had a Ukraine peace plan and talks have taken place between the US, Ukraine and Europe, which may lead to an eventual easing of sanctions on Russian fuel. While Europe is looking to phase out its remaining Russian gas consumption, fewer restrictions would increase available global supply. 

• The market move is optimistic though given that there is a long way to go before a peace deal is implemented and Russia has pulled out before resulting in no change in the situation.
• Tight enforcement of current restrictions is unlikely while talks are ongoing, which are due to continue on Monday and if they go well President Zelenskyy could visit the US this week.
• Concerns that the US deal, which favours Russia, was inflexible have been calmed with President Trump saying that it was not final, Zelenskyy posting there are “signals that President Trump’s team hears us” and the White House saying Ukraine’s concerns had been addressed.
• Projections are signalling mild weather at the start of December in Europe, according to Vaisala.
• Unlike Europe, US gas prices rose 2.3% to $4.4577 to be up 11% in November driven by forecasts for colder weather into December. They are now approaching overbought levels, according to Bloomberg.
• Lower-48 US gas production rose 7.6% y/y on Friday while demand fell 9.2% y/y and estimated flows to LNG export facilities were down 1.8% w/w, according to BNEF data.