Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD weakened overnight as the tax reform debate continues.  The Washington Post revealed Senate Republicans want to delay lowering the corporate rate until 2019.  Kevin Brady, the House Republican in charge of the tax bill, made further amendments to his bill to garner support in the House.  We highlight it is not unusual for the Senate and the House to have different plans and it will take time for a consensus to be formed into one single tax bill that passes both the Senate and the House.
  • Roy Moore, a Republican vying to replace US Attorney General Jeff Sessions as a Senator for Alabama, may be forced to pull out of the by‑election (set for 12 December) because of personal misconduct allegations.  If Moore pulls out and is replaced with a Democrat, the balance in the Senate shifts against the Republicans, making it harder to push through a tax plan, removing a source of support for the USD.
  • AUD/USD is firmer overnight but is still struggling to push higher once it approaches 0.7700.  The RBA’s Statement on Monetary Policy is the highlight today (11.30am Sydney).  Following Tuesday’s Board meeting, we do not expect the SMP to move the AUD much today.  There is a small chance the SMP modestly weighs on Australian interest rate expectations if the RBA trims the near‑term underlying inflation forecasts following weaker Q3 inflation.

 

Overnight Data:

  • US new claims for unemployment insurance (jobless claims) rose by 10,000 to 239,000 in the latest week (forecast 231,000).
  • Chinese consumer prices in October were up 1.9% on a year ago (forecast 1.8%).  Producer prices were up 6.9% (forecast 6.6%).

 

Global Equity Markets:                                                                                                                  

  • European shares recorded the biggest one‑day fall since June on a raft of negative economic, corporate and geopolitical news.  Shares in German industrial giant Siemens fell 3.7% after reporting a 10% drop in quarterly profit.  Investors also fretted about the potential for US tax proposals to be enacted.  The pan‑European STOXX 600 index fell by 1.1%.  The German DAX fell by 1.5% and the UK FTSE lost 0.6%.  In London trade, shares in Rio Tinto fell by 2.5% and BHP fell by 3.2%.
  • US sharemarkets fell sharply on Thursday as investors feared about potential delays to the Republican tax package.  The Senate version of the tax bill is believed to delay the cut in the corporate tax rate by a year.  Shares in department store Macy’s rose by 11% after profit beat expectations.  With just over an hour of trade to go the Dow Jones was down by 129 points or 0.5% after being down 253 points at one stage.  The S&P 500 was down by 0.6% and the Nasdaq fell by 56 points or 0.8%.

 

Commodities:                                                                                         

  • Global oil prices rose on Thursday.  Saudi Arabia plans to cut its crude exports by 120,000 barrels per day in December compared with November, slashing allocations to all regions, a spokesman for the energy ministry told Reuters on Thursday.  Investors were also watching political tensions in the Middle East.  Kuwait and Saudi Arabia are both advising their nationals against travel to Lebanon.  Brent crude rose by US44 cents or 0.7% to US$63.93 a barrel.  US Nymex rose by US36 cents or 0.6% to US$57.17 a barrel.
  • Base metal prices fell by up to 3.2% on the London Metals Exchange on Thursday nickel down 3.2% and other metals down up to 0.7%.  But lead rose by 0.3%.  The gold futures price rose by US$3.80 or 0.3% to $1,287.50 an ounce.  The spot gold price was trading around US$1,288 an ounce in late US trade.  Iron ore fell by US60 cents or 1.0% to US$61.90 a tonne.

 

Ahead: 

  • RBA’s Statement on Monetary Policy is due.
  • US November consumer sentiment is out.

 

Indicative Rates (Bank to Sell):

AUD / USD 0.7632 AUD / CAD 0.9594 USD / JPY 113.43
AUD / JPY 86.18 AUD / THB 24.52 GBP / USD 1.3150
AUD / EUR 0.6538 AUD / HKD 5.8907 NZD / USD 0.6954
AUD / GBP 0.5778 AUD / SGD 1.0358 NZD / EUR 0.5973
AUD / NZD 1.0958 AUD / FJD 1.5803 AUD / CNY 5.0678
AUD / CHF 0.7437 AUD / PGK 2.4171 All Ordinaries 6122.41
AUD / DKK 4.8545 EUR / USD 1.1493 Gold $US/oz 1285.59
AUD / SEK 6.3775 EUR / GBP 0.8854 Oil WTC $/b 57.11

 

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