Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD eased slightly overnight against most major currencies. US September industrial production lifted by 0.3% after the hurricane‑effected 0.7% decrease in August. The data is in line with our views the hurricane will have only temporary effects on the US national economy. The upcoming US data highlights are housing starts and building permits (11.30pm Sydney) and the Fed’s Beige book (5.00am tomorrow Sydney). The Fed’s Dudley and Kaplan discuss economic developments (11pm Sydney).
  • The Senate has not yet put their 2018 budget resolution to a vote, though that may happen sometime later this week. Renegade Republican senator John McCain, who helped stop changes to health care reform earlier in the year, said he supports the Senate budget resolution. The White House Budget Director, Mick Mulvaney, warned that not passing a budget resolution this week would likely result in tax legislation being delayed until next year. An expansionary US budget that includes large cuts to corporate income taxes is the main upside risk to our bearish USD view.
  • According to Reuters, President Trump is likely to announce the new Federal Reserve chair before he leaves for his trip to Asia on 3 November. The USD has been supported somewhat in recent days by speculation the academic economist John Taylor is the front‑runner for the Fed chair. John Taylor is famous in academic circles for his “Taylor rule” of monetary policy. In current circumstances, his rule would suggest the Funds rate should be around 3% compared to the current rate of 1.00‑1.25%.
  • AUD/USD rebounded slightly overnight. Yesterday’s RBA minutes show it is comfortable with developments in the domestic economy. But the minutes also imply that a rate rise remains some way off. Iron ore futures eased in the Asian session. But high and rising LNG prices is a support for AUD. LNG production will approach iron ore production in coming years. This means that LNG prices will challenge iron ore prices as an influence on AUD. China’s Communist Party National Congress starts today and extends into next week.


Overnight Data:

  • US import prices rose 0.7% in September (forecast +0.5%) with export prices up 0.8% (forecast +0.4%). Industrial production rose 0.3% in September (forecast +0.2%). The National Association of Home Builders index rose from 64 to 68 in October (forecast 64). The Federal Budget moved from a US$108bn deficit to a US$6bn surplus in September.


Global Equity Markets:                                                                                                                   

  • European share markets were generally softer on Tuesday. The STOXX 600 index fell by 0.3% from 4‑month highs with weaker commodity prices weighing on the resources sector. But shares in education firm Pearson rose by 7.3% after predicting that full‑year profit would fall into the top half of its forecast range. The German Dax and the UK FTSE both eased by 0.1%. The Spanish IBEX bucked the trend, up by 0.4%. In London trade, shares in both Rio Tinto and BHP fell by 0.2%.
  • US share markets ended mixed on Tuesday. Investors responded to mixed corporate earnings results from Goldman Sachs, Morgan Stanley, UnitedHealth and Johnson & Johnson. The Dow Jones rose above 23,000 points for the first time in history during the session and finished trade higher by 40 points or 0.2% to 22,997 points. The S&P 500 rose by 0.1% and the Nasdaq eased by less than 1 point.



  • Global oil prices ended flat on Tuesday, reversing earlier gains. Investors weighed up expectations of higher US oil production and exports with concerns about stability in the Middle East. Investors are concerned that fighting between Iraqi and Kurdish forecasts could serve to crimp oil exports from the region.  Investors await weekly US inventory data. Brent crude rose by US6 cents or 0.1% to US$57.88 a barrel. US Nymex rose by US1 cent to US$51.88 per barrel.
  • Base metal prices fell by up to 3.7% on the London Metals Exchange on Tuesday with zinc down the most. But aluminium bucked the trend, up by 0.2%. The gold futures price fell by US$16.80 or 1.3% to $1,286.20. The spot gold price was around US$1,286 an ounce in late US trade. Iron ore fell by US70 cents or 1.1% to US$61.70 a tonne.



  • In Australia, no major economic data is scheduled. BHP releases quarterly production data.
  • In China, the National People’s Congress begins.
  • In the US, data on housing starts is released with weekly mortgage finance data.


Indicative Rates (Bank to Sell):

AUD / USD 0.7796 AUD / CAD 0.9680 USD / JPY 112.18
AUD / JPY 87.06 AUD / THB 25.07 GBP / USD 1.3192
AUD / EUR 0.6607 AUD / HKD 6.0253 NZD / USD 0.7174
AUD / GBP 0.5884 AUD / SGD 1.0553 NZD / EUR 0.6096
AUD / NZD 1.0848 AUD / FJD 1.5918 AUD / CNY 5.1643
AUD / CHF 0.7474 AUD / PGK 2.4459 All Ordinaries 5958.08
AUD / DKK 4.9077 EUR / USD 1.1618 Gold $US/oz 1285.58
AUD / SEK 6.3394 EUR / GBP 0.8921 Oil WTC $/b 51.82



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