Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD is up against most major currencies and U.S. 10‑year Treasury yields rose to near a six‑month high of 2.41% supported by favourable U.S. tax reform developments. A deal on a final joint (House of Representative and Senate) 2018 budget with reconciliation instructions can potentially be reached as soon as Thursday. The U.S. House of Representatives is scheduled to vote Thursday on a Senate budget resolution that allows for US$1.5 trillion increase to the budget deficit over the next ten years (equivalent to roughly 0.8% of GDP). A joint 2018 budget with reconciliation instructions contains a legislative tool that will facilitate adoption of a tax reform bill later this year.
  • AUD/USD drifted lower overnight on USD strength. AUD/USD will be driven today by Australia’s Q3 CPI report (11:30am Sydney). In line with consensus, we anticipate the policy relevant underlying measure of inflation (average of trimmed mean and weighted median) to increase by 0.5% in Q3. This would push the annual growth up to 2.1% in Q3 from 1.9% the previous quarter. We believe the risks for underlying CPI inflation are evenly balanced. This reflects the competing forces of the solid improvement in the labour market against continued weakness in wages growth. In our view, a higher underlying CPI print (above 0.5%) will support an upward revision to Australian interest expectations and lift AUD/USD back above 0.7800. But a lower underlying CPI print (below 0.5%) can drag AUD/USD lower towards its 200‑day moving average currently at 0.7693.


Overnight Data:

  • In US economic data, the Richmond Federal Reserve composite index fell in October from +19 to +12. The Markit flash manufacturing index rose from 53.1 to 54.5 in October with the services index up from 55.3 to 55.9.


Global Equity Markets:                                                                                                                  

  • European share markets were mixed on Tuesday as traders positioned ahead of the European Central Bank meeting. The broader European STOXX 600 index fell by 0.4%. However, the German Dax rose by 0.1% and the UK FTSE rose by less than 0.1%. In London trade, shares in Rio Tinto rose by 0.1% and BHP rose by 0.9%.
  • US sharemarkets rose on Tuesday with the Dow Jones at fresh record highs. Shares in 3M rose by 5.9% and shares in Caterpillar rose by 5.0% after both companies reported earnings results that were embraced by investors. Shares in General Motors rose 3% after reaffirming its full‑year earnings forecast. The Dow Jones rose by 168 points or 0.7%. The S&P 500 rose by 0.2%. And the Nasdaq rose by almost 12 points or 0.3%.



  • Global oil prices rose on Tuesday after the Saudi Arabian energy minister spoke at an investor conference in Riyadh and expressed his determination to achieve balance between supply and demand for oil on global markets. Brent crude rose by US96 cents or 1.7% to US$58.33 a barrel.
  • Base metal prices rose by up to 1.9% on the London Metals Exchange on Tuesday with zinc up the most although lead fell by 1.2%.
  • The gold futures price fell by US$2.60 or 0.2% to $1,278.30 an ounce. The spot gold price was trading around US$1,277 an ounce in late US trade. Iron ore rose by US$1.40 or 2.3% to US$61.70 a tonne.



  • In Australia, the Consumer Price Index is released.
  • In the US, data on durable goods orders are released with new home sales, the FHFA home price series and weekly mortgage finance.


Indicative Rates (Bank to Sell):

AUD / USD 0.7728 AUD / CAD 0.9716 USD / JPY 113.91
AUD / JPY 87.65 AUD / THB 24.92 GBP / USD 1.3134
AUD / EUR 0.6553 AUD / HKD 5.9698 NZD / USD 0.6907
AUD / GBP 0.5859 AUD / SGD 1.0518 NZD / EUR 0.5871
AUD / NZD 1.1174 AUD / FJD 1.5960 AUD / CNY 5.1282
AUD / CHF 0.7506 AUD / PGK 2.4449 All Ordinaries 5962.51
AUD / DKK 4.8668 EUR / USD 1.1614 Gold $US/oz 1277.12
AUD / SEK 6.3394 EUR / GBP 0.8957 Oil WTC $/b 52.27



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