Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD is firmer against most major currencies.  Political uncertainty in Spain, speculation the next chair of the Federal Reserve may have a more hawkish monetary policy bias and encouraging U.S. economic activity are supporting USD.

U.S. President Donald Trump will nominate his choice for Federal Reserve Chair within two to three weeks.  A favourite to be next Fed chair is former Fed governor Kevin Warsh. Warsh is viewed as a monetary policy hawk in part because he has been a critic of the Fed’s quantitative easing policy. Current Fed Chair Janet Yellen, Director of the National Economic Council Gary Cohn and current Fed governor Jerome Powell are also in the running for the position.

  • AUD/USD is trading in a tight range ahead of today’s RBA meeting (2:30pm Sydney). The RBA is widely expected to leave the cash rate unchanged at 1.50% and reiterate its neutral stance.  AUD/USD may receive some limited support from today’s RBA policy decision.  The Australian economic data has definitely improved (CBA’s manufacturing PMI rose to 53.8 in September) but we expect the RBA to reinforce it is in no hurry to begin raising interest rates.


Overnight Data:

  • On the data front, the U.S. ISM manufacturing PMI rose in September to 60.8, the highest level since May 2004.  This is indicative of solid U.S. manufacturing activity.  Nevertheless, soft U.S. inflation pressures will continue to weigh on U.S. interest rate futures and curtail USD upside.  The U.S. core PCE deflator slowed in August to 1.3%pa, the slowest pace in almost two years.  Moreover, we expect U.S. average hourly wage growth (Fri) to remain muted at 2.5%pa in September.


Global Equity Markets:                                                                                                                  

  • European share markets rose on Monday but a key exception was Spain.  The IBEX index fell by 1.5% after violence marred the controversial independence vote in Catalonia. Banks headquartered in Catalonia fell hardest. Other share indexes rose in Europe on optimism about the health of the global economy. The STOXX 600 rose 0.5%, the German Dax rose by 0.6% and the UK FTSE lifted by 0.9%.
  • US share markets rose to record highs on Monday. Investors were encouraged by solid manufacturing data and optimism around US President Trump’s tax reform plans. Financials and healthcare stocks led the gains. The Dow Jones index rose by 153 points or 0.7%, the S&P 500 was up by 0.4% to record highs and the Nasdaq rose by 21 points or 0.3% to record highs.



  • US oil prices fell by more than 2% on Monday on expectations of higher supplies.  Energy services company Baker Hughes said that drillers added six oil rigs in the US over the past week. Also, Iraq announced its exports rose slightly in September. Oil super major Exxon Mobil’s shares fell by 0.4%. Brent crude fell by US67 cents or 1.2% to US$56.12 a barrel. US Nymex fell by US$1.09 or 2.1% to US$50.58 a barrel.
  • Base metal prices rose by up to 2.1% on the London Metal Exchange with zinc doing the best, hitting the highest levels in more than ten years. But nickel fell by 1.1%.
  • The December Comex gold futures price fell by US$9.00 or 0.7% to US$1,275.80 per ounce. The spot gold price was trading around US$1,273 an ounce in late US trade. Iron ore was unchanged at US$61.50 a tonne.



  • In Australia, new home sales, job ads and building approvals data are released and the Reserve Bank Board meets.
  • In the US, new vehicle sales data is issued with the ISM New York index and weekly chain store sales data.


Indicative Rates (Bank to Sell):

AUD / USD 0.7782 AUD / CAD 0.9655 USD / JPY 112.72
AUD / JPY 87.33 AUD / THB 25.26 GBP / USD 1.3276
AUD / EUR 0.6615 AUD / HKD 6.0184 NZD / USD 0.7196
AUD / GBP 0.5836 AUD / SGD 1.0583 NZD / EUR 0.6132
AUD / NZD 1.0797 AUD / FJD 1.5882 AUD / CNY 5.1795
AUD / CHF 0.7435 AUD / PGK 2.4668 All Ordinaries 5791.34
AUD / DKK 4.9130 EUR / USD 1.1585 Gold $US/oz 1271.53
AUD / SEK 6.3424 EUR / GBP 0.8839 Oil WTC $/b 50.54



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