Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD pared back some of its recent gains overnight and U.S. 10‑year Treasury yields fell by roughly 4bps to 2.37% in large part because of soft U.S. inflation pressures. The U.S. core PCE deflator, the Fed’s favourite measure of inflation, came in line with expectations at just 1.3%pa in September (the same annual rate as the previous month). The core PCE deflator has been below the Fed’s 2% objective since May 2012, reinforcing expectations the FOMC will keep the target range for the federal funds rate between 1.00‑1.25% at Thursday’s meeting. Encouragingly, U.S. personal income and spending rose more than expected in September but this reflects the effects of the hurricanes.
  • We still anticipate a stronger USD this week because of favourable U.S. tax reform developments. Kevin Brady, the Republican chairman of the tax-writing House ways and means committee, is expected to unveil a comprehensive tax reform plan Thursday (Wednesday New York & London times). This will be the first step in the tax legislative process. Markup will then begin on 6 November. A markup session is where the House ways and means committee goes through the bill line by line and amends the package before advancing it to the full House for a vote (likely to be by end‑November).
  • Meanwhile, White House officials confirmed that President Donald Trump will announce his choice for Fed Chair on Thursday. The pick of monetary policy hawks John Taylor or Kevin Warsh as Fed Chair would be the most bullish USD outcome. In contrast, if the selection for Fed Chair turns out to be Jerome Powell or Janet Yellen the USD will likely face some intra‑day headwinds. According to Predictit.com, Jerome Powell remains the front runner by a wide margin.
  • AUD/USD consolidated overnight on a softer USD. In our view, favourable Chinese economic activity can offer commodity prices, AUD and NZD some support today. China’s October manufacturing PMI (12pm Sydney) is expected to remain firm above the 50 level consistent with economic expansion (consensus: 52, prior: 52.4). AUD will largely ignore the release of Australia’s September private sector credit report (11:30am Sydney). Similarly, New Zealand’s September building permits will not have a material impact on NZD (8:45am Sydney).


Overnight Data:

  • US personal spending rose by 1.0% in September (forecast +0.8%) with income up 0.4% as expected.  The Fed’s preferred price measure ‑ the core personal consumption deflator ‑ rose by 0.1% and is 1.3% higher on a year ago, well short of the Fed’s 2% price target.


Global Equity Markets:                                                                                                                  

  • European sharemarkets edged higher to fresh five‑month highs on Monday.  The Spanish IBEX index rose 2.4% on investor hopes that a solution would be found for the Catalan crisis. Spanish banks, Caixabank and Banco de Sabadell, both rose more than 4%.  European iPhone suppliers posted solid gains.  The broader European STOXX 600 index rose by 0.1% with the German Dax also up by 0.1% while the UK FTSE lost 0.2%.  In London trade, shares in Rio Tinto rose by 0.3% and BHP rose by 0.7%.
  • US sharemarkets eased on Monday, dragged lower by declines in healthcare, financials and consumer staples. Investors were disappointed by reports that proposed tax cuts may be phased in over a long five‑year period.  In response to broker downgrades, shares in Advanced Micro Devices lost 8% while General Motors lost 2.8%.  Shares in Apple gained 2.3% on reports of firm demand for the iPhone X.  The Dow Jones fell by 85 points or 0.4% with the S&P 500 losing 0.4%.  And the Nasdaq lost 2 points or less than 0.1%.



  • Global oil prices rose by 0.50‑0.75% on Monday as investors mulled reports that Saudi Arabia and Russia may extend the oil production restraint agreement. OPEC members next meet to discuss the agreement on November 30.  Brent crude rose by US46 cents or 0.8% to US$60.90 a barrel. US Nymex rose by US25 cents or 0.5% to US$54.15 a barrel.
  • Base metal prices were mixed on the London Metals Exchange on Monday. Aluminium, lead and tin fell by up to 2.3% while other metals rose by up to 1.3%. The gold futures price rose by US$5.90 or 0.5% to $1,277.70 an ounce.  The spot gold price was trading around US$1,277/oz in late US trade. Iron ore fell by US70 cents or 1.2% to US$58.00 a tonne.



  • In Australia, private sector credit and new home sales data are expected.
  • In the US the Employment Cost Index is released with consumer confidence, the Case Shiller home price series and Chicago Purchasing Managers Index.


Indicative Rates (Bank to Sell):

AUD / USD 0.7640 AUD / CAD 0.9720 USD / JPY 113.17
AUD / JPY 86.07 AUD / THB 24.63 GBP / USD 1.3209
AUD / EUR 0.6540 AUD / HKD 5.8963 NZD / USD 0.6879
AUD / GBP 0.5758 AUD / SGD 1.0382 NZD / EUR 0.5904
AUD / NZD 1.1090 AUD / FJD 1.5868 AUD / CNY 5.0779
AUD / CHF 0.7444 AUD / PGK 2.4198 All Ordinaries 5983.72
AUD / DKK 4.8550 EUR / USD 1.1502 Gold $US/oz 1276.63
AUD / SEK 6.3670 EUR / GBP 0.8821 Oil WTC $/b 54.06



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