Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD is stronger across the board, particularly against CAD and JPY.  Philadelphia Fed president Harker commented that a December rate hike is ‘pencilled in’.  San Francisco Fed president Williams said moderate growth and higher inflation will allow the FOMC to tighten.  Jobless claims for the week to 30 September continued to fall, indicating the economic impacts of the hurricanes are fading.  US Treasury yields increased by 2bps to 2.34% and have increased by 30bps in the past month, supporting the USD.  The US House of Representatives passed a budget which now moves to the Senate for debate.
  • The next USD focus is the U.S. September non‑farm payrolls report (11.30pm Sydney).  We expect non‑farm payrolls to increase by only 50,000 because of the hurricanes while we expect average hourly wage growth to remain muted.  This will weigh on U.S. interest rate futures and curtail some of the recent gains in the USD.
  • AUD continued to fall overnight.  The weakness partly reflects the ongoing reaction to yesterday’s retail trade ‘shocker’ and partly reflects a stronger USD.  Sales fell by 0.6% over August following a revised 0.2% decline in July (previously reported as flat).  The market was positioned for a 0.3% increase.  The detail reveals that there were solid falls in the majority of the components of the retail trade survey.  Retail trade was also down in all states.  While retail trade growth should pick up a little over the remainder of 2017, today’s retail trade data supports our view that monetary policy will be on hold until well into 2018.
  • We do not expect AUD/USD to fall significantly further given the synchronised global economic growth is likely to support commodity prices.  In fact, the global manufacturing PMI held steady at 53.2pts in September consistent with further solid increase in worldwide manufacturing activity.  Additionally, AUD will gain support from the improvement in Australia’s current account deficit, currently 2.1% of GDP.


Overnight Data:

  • In US economic data, the trade deficit declined by 2.7% to US$42.4 billion in August, the lowest level since September 2016, on rising exports of goods and services.  Claims for unemployment insurance fell by 12,000 to 260,000 (forecast 265,000) last week.  Factory orders rose by 1.2% in August (forecast 1.0%) having declined by 3.3% in July.


Global Equity Markets:                                                                                                                   

  • European sharemarkets were mixed on Thursday.  Spanish equities rebounded with the IBEX up by 2.5%, led by banking stocks as worries over Catalonia eased.  Reports suggested that Catalan separatists were reconsidering a definitive declaration of independence from Spain as financial firms threatened to relocate elsewhere.  The STOXX 600 rose 0.2%, the German Dax was flat and the UK FTSE was up by 0.5%.
  • US sharemarkets rose for an eighth consecutive day to fresh record highs on US budget and tax reform optimism. Technology stocks were strong performers. The Dow Jones rose by 114 points or 0.5%, the S&P 500 was up by 0.6% and the Nasdaq was up by 0.8%.



  • US oil prices rebounded on Thursday after Saudi Arabia King Salman bin Abdulaziz made a historic visit to see Russian President Vladimir Putin.  The meeting boosted market hopes for an extension of the current OPEC‑Russia deal to limit oil production.  Brent crude rose by US$1.20 or 2.2% to US$57.00 a barrel. US Nymex increased by US81 cents or 1.6% to US$50.79 a barrel.
  • Base metal prices were mixed on the London Metals Exchange.  Copper (+2.9%) rallied the most in five weeks on improving global growth expectations.  Nickel (‑0.7%) was an underperformer on concerns over rising supply in Indonesia.  The December Comex gold futures price declined by US$3.60 or 0.3% to US$1,273.20 per ounce as the US dollar strengthened.  The spot gold price was trading around US$1,268 an ounce in late US trade.  Iron ore fell by 0.5% to US$61.20 a tonne.



  • There are no major economic releases in Australia today.
  • In the US, the non‑farm payrolls (employment) report, wholesale trade sales and inventories, and consumer credit data will be the focus of market participants.


Indicative Rates (Bank to Sell):

AUD / USD 0.7745 AUD / CAD 0.9651 USD / JPY 112.80
AUD / JPY 86.98 AUD / THB 25.11 GBP / USD 1.3120
AUD / EUR 0.6596 AUD / HKD 5.9871 NZD / USD 0.7120
AUD / GBP 0.5878 AUD / SGD 1.0553 NZD / EUR 0.6079
AUD / NZD 1.0861 AUD / FJD 1.5809 AUD / CNY 5.1549
AUD / CHF 0.7424 AUD / PGK 2.4462 All Ordinaries 5720.31
AUD / DKK 4.8982 EUR / USD 1.1563 Gold $US/oz 1268.45
AUD / SEK 6.2873 EUR / GBP 0.8928 Oil WTC $/b 50.74



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