Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD held on to Friday’s gains and U.S. 10‑year Treasury yields rose by about 7bps to near a four‑month high of 2.39% supported by favourable progress on U.S. tax reform. Positive U.S. tax reform developments can continue to underpin a firmer USD. A deal on a final joint (House of Representative and Senate) 2018 budget with reconciliation instructions can potentially be reached later this week or early November. A joint 2018 budget with reconciliation instructions resolution contains a legislative tool that will facilitate adoption of a tax reform bill later this year.
  • The USD stands to benefit the most the closer a joint 2018 budget with reconciliation instructions is to the Senate’s budget resolution to allow for a US$1.5 trillion increase to the budget deficit. The reason is it will give Republicans greater leeway to make deep tax cuts without revenue offsets. The other important factor for the USD will be how much of the US$1.5 trillion fiscal stimulus will be company tax cuts. An initial draft tax reform bill is expected by mid‑November.
  • AUD/USD is trading near Friday’s lows on a firm USD. AUD/USD will be partly driven by Wednesday’s Australia Q3 CPI report. In line with consensus, we anticipate the policy relevant underlying measure of inflation (average of weighted median and trimmed mean CPI) to increase by 0.5% in Q3 (2%pa). A higher underlying CPI print (above 0.5%) will support an upward revision to Australian interest expectations in favour of AUD. But a lower underlying CPI print (below 0.5%) will weigh on AUD. RBA Deputy Governor Guy Debelle’s speech (title: Uncertainty) on Thursday will also be of interest.


Overnight Data:

  • In US economic data, existing home sales rose 0.7% in September to a 5.39 million annual rate (forecast 5.30 million). The median home price rose 4.2% over the year. The US budget surplus was US$8bn in September compared with a surplus of US$33bn a year earlier.


Global Equity Markets:                                                                                                                   

  • European sharemarkets rose on Friday, supported by solid earnings results. Financials and technology stocks were amongst the gainers. The broader European STOXX 600 index rose by 0.2%. The German Dax and the UK FTSE were both broadly flat.
  • US sharemarkets ended at record highs on Friday. Investors were encouraged by news that the US Senate had passed a budget resolution. The hope is that this will pave the way for Congress to pass President Trump’s tax plans. Lower taxes may lead to stronger economic growth and higher inflation. The Dow Jones rose by almost 166 points or 0.7%. The S&P 500 rose by 0.5%. And the Nasdaq lifted by 24 points or 0.4%. Over the week the Dow rose by 2% with the S&P 500 up 0.9% and the Nasdaq up 0.4%.



  • Global oil prices rose modestly on Friday. Based on reports from a shipping source, Reuters reported that “oil exports from Iraq’s Kurdistan via the Turkish port of Ceyhan were flowing at average rates of 216,000 barrels per day (bpd), down from the usual flows of around 600,000 bpd.” Baker Hughes also reported that the number of oil rigs in operation in the US fell for a third week. Brent crude rose by US52 cents or 0.9% to US$57.75 a barrel. US Nymex rose by US18 cents or 0.4% to US$51.47 a barrel.
  • Base metal prices fell by up to 1.4% on the London Metals Exchange on Friday with tin down the most. The gold futures price fell by US$9.50 or 0.7% to $1,280.50 an ounce. The spot gold price was trading around US$1,280 an ounce in late US trade. Over the week gold fell by US$24.10 or 1.8%.  Iron ore rose by US$1.20 or 2.0% to US$60.80 a tonne. Over the week iron ore rose US80c.



  • In China, the house price index is released.
  • In the US, the Chicago Federal Reserve National Activity index is released.


Indicative Rates (Bank to Sell):

AUD / USD 0.7764 AUD / CAD 0.9726 USD / JPY 113.84
AUD / JPY 88.02 AUD / THB 25.04 GBP / USD 1.3190
AUD / EUR 0.6580 AUD / HKD 5.9973 NZD / USD 0.6948
AUD / GBP 0.5862 AUD / SGD 1.0561 NZD / EUR 0.5902
AUD / NZD 1.1161 AUD / FJD 1.5984 AUD / CNY 5.1404
AUD / CHF 0.7497 AUD / PGK 2.4612 All Ordinaries 5968.62
AUD / DKK 4.8865 EUR / USD 1.1622 Gold $US/oz 1281.12
AUD / SEK 6.3349 EUR / GBP 0.8925 Oil WTC $/b 51.58



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