Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • GBP/USD surged almost 2 US cents and AUD/GBP slumped by 0.6 pence after positive comments from the EU’s chief Brexit negotiator Michel Barnier. Barnier indicated the EU would offer the UK a two year transition deal to stay in the EU market if the UK fulfil certain criteria. In our view there is nothing new here, but it comes when progress has been limited in recent weeks. The reaction by GBP overnight shows how hard GBP will rally if and when a deal is done. We are sticking with our view that GBP will lift aggressively by year end if the EU and the UK come to an agreement.
  • AUD/USD consolidated overnight after moving up yesterday because of the weaker USD. Iron ore spot prices increased marginally yesterday, though they have decreased significantly in the past month and a half. Despite the fall in iron ore prices, the overall price of Australian commodity exports has increased in recent months according to the RBA’s commodity price index. For example, the LNG price has lifted most of this year, guiding AUD higher. The huge investment in Australian LNG capacity in the past decade will soon push Australia to be in the world’s top two exporters of LNG and Australia’s second largest export.  The highlights today are the release of the RBA’s Financial Stability Review but we expect no reaction by AUD as usual (11.30am Sydney) and China’s September trade balance (time unknown).
  • USD lifted marginally overnight. A speech by FOMC Governor and potential successor to Yellen, Jerome Powell, stuck to the script on “Prospects for emerging market economies in a normalising world”. On US monetary policy, Powell said, “U.S. monetary policy normalization has been and should continue to be gradual, as long as the U.S. economy evolves roughly as expected.”  The US highlights today are the September CPI and retail sales (11.30pm Sydney). The US core CPI has disappointed in recent months, which has guided the USD lower because the Fed does not need to increase the Funds rate much more with weak inflation pressures.


Overnight Data:

  • US producer price inflation rose by 0.4% in September to an annual rate of 2.6% ‑ the largest gain since February 2012 on rising gasoline prices. Weekly claims for unemployment insurance fell to a one‑month low of 250,000 (October 7).


Global Equity Markets:                                                                                                                  

  • European share markets were broadly positive on Thursday, led by Germany’s DAX benchmark index which rose above 13,000 points for the first time in its 30‑year history. Shares of Germany’s largest airline Lufthansa rose by 2.3% after the company signed a EUR210 million deal to buy parts of insolvent carrier Air Berlin. The STOXX 600 was flat, the German Dax rose by 0.1%, while the UK FTSE rose by 0.3%. In London trade, shares in Rio Tinto rose by 0.3% and BHP shares increased by 0.7%.
  • US share markets paused on Thursday following lacklustre quarterly earnings results from JPMorgan and Citigroup. The two banks managed to beat profit and revenue estimates despite recording a drop in trading revenue. AT&T fell over 4% after the US’ second largest wireless carrier said that it lost 90,000 video subscribers in the September quarter. The Dow Jones fell by 32 points or 0.1%, the S&P 500 fell by 0.2% and the Nasdaq decreased by 12 points or 0.2%.



  • Global oil prices fell as the International Energy Agency lowered its forecast for oil demand in 2018.  Losses were partially offset by falling US crude oil inventories last week. Brent crude fell by US63 cents or 1.1% to US$56.31 a barrel. US Nymex fell by US70 cents or 1.4% to US$50.60 a barrel.
  • Base metal prices were mixed on the London Metals Exchange. Nickel (+2.5%), copper (+1.6%), zinc (+1.4%), aluminium (+0.8%) all rose on China demand optimism. Tin (‑0.6%) and lead (‑0.2%) both lagged. The gold futures price rose by US$7.60 to $1,296.50. The spot gold price was trading around US$1,293 an ounce in late US trade. Iron ore fell by US40 cents or 0.7% to US$57.40 a tonne.



  • In Australia, the Reserve Bank’s semi‑annual Financial Stability Review is released, along with housing occupancy and cost data.
  • In the US, consumer prices, retail sales and consumer sentiment data are all released.
  • Chinese international trade data is also expected.


Indicative Rates (Bank to Sell):

AUD / USD 0.7772 AUD / CAD 0.9618 USD / JPY 112.27
AUD / JPY 86.87 AUD / THB 25.00 GBP / USD 1.3267
AUD / EUR 0.6551 AUD / HKD 6.0073 NZD / USD 0.7133
AUD / GBP 0.5833 AUD / SGD 1.0499 NZD / EUR 0.6028
AUD / NZD 1.0879 AUD / FJD 1.5906 AUD / CNY 5.1199
AUD / CHF 0.7427 AUD / PGK 2.4551 All Ordinaries 5864.10
AUD / DKK 4.8659 EUR / USD 1.1683 Gold $US/oz 1293.80
AUD / SEK 6.2984 EUR / GBP 0.8919 Oil WTC $/b 50.56



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