Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD was slightly firmer in overnight trade, on a day without major news flow. The Chicago Fed national activity index for September was slightly stronger than expected. The volatile monthly series moved back into positive territory and equal to its index level of 17.0 in June. U.S. ten‑year treasury yields were largely unchanged at 2.37%. A deal on a final joint (House of Representative and Senate) 2018 budget with reconciliation instructions can potentially be reached later this week or by early November, and this is what market participants are focused upon. A joint 2018 budget with reconciliation instructions contains a legislative tool that will facilitate adoption of a tax reform bill later this year. The other important factor for the USD will be how much of the US$1.5 trillion fiscal stimulus will be company tax cuts.
  • AUD/USD drifted lower in overnight trade, but has found support. Base metal and coal prices were higher in overnight and yesterday’s trade. Election‑related selling in NZD/USD appears to have been exhausted, which has eased some of the modest downward pressure on AUD from this source. AUD/NZD remains at attractively high medium‑term levels for importers. Participants are now looking towards tomorrow’s Australia Q3 CPI report for intra‑day direction in AUD/USD and AUD/NZD. We see upside risks to headline CPI, which may generate some strength in AUD as Australia’s two‑and‑three year bond yields edge higher. AUD/USD will likely lift to the 30 day moving average of 0.7881 if the Australian Q3 CPI is higher than expected.

 

Overnight Data:

  • In US economic data, the National Activity index rose from minus 0.37 points to +0.17 points in September.

 

Global Equity Markets:                                                                                                                  

  • European sharemarkets generally rose on Monday although banks softened and investors monitored the political crisis in Spain’s Catalonia region. Dutch healthcare technology company Philips rose 1.1% in response to latest profit figures, especially strong sales in China. The broader European STOXX 600 index rose by 0.2% although the Spanish IBEX lost 0.6%. The German Dax rose 0.1% and the UK FTSE was broadly flat.
  • US sharemarkets eased on Monday from record highs. Shares in General Electric fell by 6.3% after various brokerages reduced price targets on the stock. Investors are also awaiting news on the next Federal Reserve chair ‑ President Trump said he was “very, very close” to making a decision. The Dow Jones ended lower by almost 55 points or 0.2%.  The S&P 500 fell by 0.4%.  And the Nasdaq lost 42 points or 0.6%.

 

Commodities:                                                                                         

  • Global oil prices were mixed on Monday. Traders are focussed on supply disruptions in Iraq with sources saying that oil exports from the country have fallen by 110,000 barrels per day (bpd) in October. But a shipping source told Reuters that crude oil exports through the Iraqi Kurdistan controlled‑pipeline to the Turkish port of Ceyhan had risen to 288,000 bpd on Monday afternoon, from 255,000 bpd earlier in the day. Brent crude fell by US38 cents or 0.7% to US$57.37 a barrel. US Nymex rose by US43 cents or 0.8% to US$51.90 a barrel.
  • Base metal prices rose by up to 1.3% on the London Metals Exchange on Monday with lead up the most although aluminium was largely flat. The gold futures price rose by US40 cents or less than 0.1% to $1,280.90 an ounce.  The spot gold price was trading around US$1,282 an ounce in late US trade. Iron ore fell by US50 cents or 0.8% to US$60.30 a tonne.

 

Ahead:

  • In Australia, weekly consumer confidence data is released.
  • In the US, weekly chain store sales data is released.

 

Indicative Rates (Bank to Sell):

AUD / USD 0.7759 AUD / CAD 0.9732 USD / JPY 113.43
AUD / JPY 87.62 AUD / THB 25.00 GBP / USD 1.3195
AUD / EUR 0.6587 AUD / HKD 5.9905 NZD / USD 0.6969
AUD / GBP 0.5854 AUD / SGD 1.0555 NZD / EUR 0.5932
AUD / NZD 1.1117 AUD / FJD 1.5974 AUD / CNY 5.1523
AUD / CHF 0.7492 AUD / PGK 2.4589 All Ordinaries 5957.18
AUD / DKK 4.8923 EUR / USD 1.1599 Gold $US/oz 1282.45
AUD / SEK 6.3478 EUR / GBP 0.8904 Oil WTC $/b 51.86

 

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