NEW ZEALAND: October Monthly Price Series First Look At Q4 Inflation Trend
There will be some partial inflation indicators released ahead of the 26 November RBNZ decision giving a first look at Q4 and if pressures moderated after the pickup in Q3. October monthly prices print on Monday which includes food, electricity, rents, travel and petrol. Food inflation appears to have turned over while electricity is high and rents at 1.8% y/y are their lowest since 2011.
- Q3 PPI is published on Wednesday. Output and input prices both rose 0.6% q/q in Q2. Costs in the ANZ business survey were lower over Q3 than Q2.
- The October performance of services index is out on Monday. It showed a decline in the rate of contraction in September with the index up 1 point to 48.8, the highest since March. However, it hasn’t printed above the breakeven 50-level since November.
- October trade data are released on Friday. The trade deficit has been widening again after posting surpluses over February-June. Merchandise export growth has been a bright spot in the economy with it rising 19% y/y in September, but imports reflect the weak domestic economy.
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BUND TECHS: (Z5) Bull Cycle Intact
- RES 4: 130.41 1.382 proj of the Sep 3 - 10 - 25 price swing
- RES 3: 130.27 High Jun 20
- RES 2: 130.05 76.4% retracement of the Jun 13 - Sep 3 bear leg
- RES 1: 129.94 High Oct 14
- PRICE: 129.76 @ 05:49 BST Oct 15
- SUP 1: 129.13 Low Oct 10 / 128.71 50-day EMA
- SUP 2: 128.25 Low Oct 7
- SUP 3: 127.88 Low Sep 25
- SUP 4: 127.61 Low Sep 3 and the bear trigger
A bull cycle in Bund futures remains intact. This week’s gains have resulted in a breach of resistance at 129.44, the Sep 10 high and a key short-term resistance, strengthening a bullish condition and signalling scope for a continuation higher. Sights are on 130.05 next, a Fibonacci retracement point. Note that moving average studies have crossed into a bull-mode position, a bullish signal. First important support is 128.71, the 50-day EMA.
FOREX: A$ & Yen Outperform, RBA’s Bullock Speaks In US Later
The USD is weaker with the BBDXY off 0.20% to the low 1212 region. Broader ranges are holding, but focus will be on if the 10yr Tsy yield can test and break under 4.00%. JPY and AUD are the outperformers today, aided by the stronger CNY fixing (under 7.1000 for the first time this year), as well as the softer US yield backdrop.
- USDJPY got close to 151.00, so under Friday’s risk off lows, but has stabilized back to 151.20/25 in latest dealings. As we noted earlier USDJPY looks too high relative to yield momentum between US-JP. AUDJPY has range traded and is currently around 98.51.
- AUDUSD is trading back above 0.6500 again boosted by better risk appetite with regional equities rallying and is up 0.4% to 0.6514, close to the 0.6518 intraday high. The pair looked through the slightly softer-than-expected September China CPI outcome. RBA Assistant Governor Hunter’s comments were consistent with the September minutes.
- NZDUSD is up only 0.1% to 0.5719 today due to indications of further RBNZ easing from its chief economist Conway. The difference in tone between the two central banks drove AUDNZD up 0.4% to 1.1387 after a 1.1392 peak.
- The USDCNY fix under 7.1000 has been another positive, while other cross asset trends have been mixed.
- Later RBA Governor Bullock participates in a fireside chat at the Nomura Research Forum in Washington DC at 1545 EDT/0645 AEDT.
- The Fed’s Miran, Waller and Schmid speak on Wednesday and the Beige book is released. The ECB’s de Guindos, Buch and Donnery, and BoE’s Breeden and Ramsden also appear. US October Empire manufacturing and August euro area IP print.
JGBS: Futures Lagging Tsys, 20yr Debt Auction Digested Smoothly, BoJ Speech Thur
Futures sit at 136.29, -0.4 versus settlement levels, little changed in the post lunch break period at this stage. We remain close to recent highs, with US Tsy futures trading with a positive bias (all eyes on the 10yr yield and whether we can break under 4.00%), imparting some positive spillover (although JGBs are lagging). The 20yr auction was digested relatively smoothly by the market. Domestic political uncertainty continues, with lack of agreement on holding the PM election on Oct 21, although this isn't weighing on JGB sentiment at this stage.
- The current rally in futures comes in the context of the firm downtrend that’s dominated prices since mid-September. Key short-term resistance has been defined at 137.30, the Sep 8 high. The latest sell-off, however, resulted in a break of support at 136.19, the Sep 4 low and a bear trigger.
- We would expect JGB futures to lag US moves. The US-JP 10yr government bond yield spread is down a further 2bps today to +235bps, close to recent lows.
- The outright 10yr JGB yield is little changed at 1.66%, while the 20 and 40yr tenors are off 2bps, the 30yr off 3.5%. The 20yr yield is just under 2.70%. The auction saw a bid to cover ratio of 3.56 versus a 12 month average of 3.25.
- Political uncertainty continues around who will be the new PM, with headlines crossing a short while ago that the parliamentary committee has failed to agree to hold the new PM election on Oct 21 (which was speculated on yesterday). Meetings between the LDP and minor parties are continuing today.
- Looking ahead, Aug core machine orders print tomorrow. Note we also hear from BoJ Board member Tamura.
