NATGAS: Ukraine Makes Marginal Gas Storage Withdrawal

The implied probability of a government shutdown on October 1 remains roughly 60%, despite confirmation of a Thursday meeting between President Donald Trump and Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Hakeem Jeffries (D-NY).  

• The Democrat leaders said in a statement this morning, “...we will emphasize the importance of addressing rising costs, including the Republican healthcare crisis. It’s past time to meet and work to avoid a Republican-caused shutdown.”
• A similar meeting between Trump, Schumer, and then-Speaker Nancy Pelosi (D-CA) in 2018 resulted in a record 34-day shutdown. During that meeting, Trump welcomed blame for a shutdown, saying he would be “proud” to induce a shutdown over border wall funding. It is unlikely Trump will offer a similar concession to Democrats this time.
• Democrats have rejected a 'clean' GOP spending patch through November 21, countering with a separate partisan CR that includes a raft of policy demands on health care.   
• Those demands will not be entertained by Republicans. At a minimum, Democrats want Trump to endorse a permanent extension to expiring Obamacare subsidies, either in a CR or in a future appropriations deal as a potential offramp.
• While there is some Republican support for such a measure, Republican leadership believe they have leverage to force Schumer to fold ahead of the deadline. As Punchbowl notes, “Trump and OMB Director Russ Vought have wide discretion over how painful a shutdown will be."

Figure 1: Government Shutdown by October 1

Source: Polymarket

• Despite Australian preliminary PMIs for September falling from their August levels, all three categories remained in expansionary territory above 50. Furthermore, S&P stated that “it was positive to see job growth continuing at a solid pace that was little changed from August”. The data has had little impact on the Australian dollar, which resides in modest positive territory today, back above 0.66.
• Short-term dips should remain supported given the technical uptrend remains intact, with initial firm support to watch at 0.6547, the 50-day EMA. CFTC Data last week shows Asset managers started to significantly reduce their Aussie shorts, -41095 (Last -68333). The Leveraged community has pulled back their shorts to be almost flat, -1519 (Last -5081).
• Some bullish analyst views below:
  • *BBVA: Despite this morning’s data, BBVA remain bullish on the AUD. The resilient Australian labour market, robust macro fundamentals overall, RBA policy and higher commodity prices should favour inflows into the AUD, which retains attractive carry appeal.
  • *CBA: AUDUSD is on track to rise from 0.66 now to fair value at 0.72 over the coming quarters, in large part because of a decrease in the U.S. dollar, according to an economist at CBA.
  • *Morgan Stanley: The Federal Reserve’s perceived emphasis on the job market at the expense of inflation will see the USD’s decline widening, according to MS strategists who now recommend selling the greenback versus CAD and AUD. They establish an AUDUSD long at 0.6580 targeting a ~3.5% gain to 0.71, with a stop at 0.6450.

• MNI: US Q2 CURRENT ACCOUNT GAP -$251.3B
• US Q1 CURRENT ACCOUNT REVISED TO -$439.8B