Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD firmed overnight largely against GBP and commodity sensitive currencies (AUD, NZD, CAD). US 10‑year Treasury yields remain sticky near 2.40% and US stocks were largely unchanged. There was no policy relevant US economic data released overnight. In our view, the USD will remain supported because the US tax legislative process is progressing at an encouraging pace. The Senate Finance Committee has started to mark‑up today their version of the “Tax Cuts and Jobs Act” unveiled last week.
  • A mark‑up session is where the Senate Finance Committee goes through the bill line by line and amends the package before advancing it to the full Senate for a vote (likely to be by end‑November). Speeches later this evening by FOMC voter Evans (7:05pm Sydney) and Chair Yellen (9pm Sydney) may generate some USD volatility.
  • AUD/USD fell overnight on weaker European equity markets and a firmer USD. Disappointing Chinese October economic data today (1pm Sydney) can temporarily undermine commodity prices and delay a recovery in AUD/USD. We see some downside risks to Chinese October fixed asset investment (consensus: 7.3% YoY) and industrial production (consensus: 6.3% YoY) as a result of the pre‑19th National People’s Congress meeting environmental protection measures and intensifying housing curbs.

 

Overnight Data:

  • In US economic data, the Federal budget deficit widened to US$63.2 billion (forecast: ‑US$62.0 billion) in October, up from ‑US$45.8 billion previously.

 

Global Equity Markets:                                                                                                                  

  • US sharemarkets rose as investors shrugged‑off concerns over the future of the US tax reform plan. President Trump urged lawmakers to end the Obamacare individual mandate and cut the top income tax rate to 35%. Shares in General Electric lost 8.0% after a dividend cut. Toy maker Mattel’s shares rose by 20.7% after rival Hasbro’s takeover bid. With an hour of trade to go the Dow Jones was up by around 25 points or 0.1%. The S&P 500 was up by 0.1% and the Nasdaq up by around 8 points or 0.2%.
  • European shares stayed near 7‑week lows on poor earnings updates. The pan‑European STOXX 600 index fell by 0.7% on Monday ‑ the fifth consecutive session of losses. The German Dax fell by 0.4%. The UK FTSE lost 0.2% as political uncertainty around the UK government weighed on bank stocks.

 

Commodities:                                                                                         

  • Global oil prices were mixed. OPEC raised its forecast for oil demand to 33.42 million barrels per day in 2018, up 360,000 barrels per day from its previous forecast. While Middle Eastern tensions provided oil prices with support, Saudi Arabia’s output rose 83,000 to 10.06 million barrels per day in October. Brent crude fell by US44 cents or 0.7% to US$63.18 a barrel. US Nymex rose by US2 cents or 0.04% to US$56.76 a barrel.
  • Most base metal prices rose on Monday, led by nickel which rose by 3.1% on the London Metals Exchange. Nickel prices have risen to 2‑year highs on electric vehicle demand expectations. Copper rose 1.6% on strong Chinese demand.
  • The gold futures price rose by US$4.70 or 0.4% to $1,278.90 an ounce. The spot gold price was trading around US$1,278 an ounce in late US trade. Iron ore fell by US10 cents or 0.2% to US$61.90 a tonne.

 

Ahead:

  • In Australia, the monthly NAB business survey and weekly ANZ‑Roy Morgan consumer confidence figures are released.
  • The monthly China industrial production, fixed asset investment and retail sales data are released.
  • In the US producer prices data is released. US Federal Reserve Chair Janet Yellen speaks.

 

Indicative Rates (Bank to Sell):

AUD / USD 0.7576 AUD / CAD 0.9565 USD / JPY 113.57
AUD / JPY 85.66 AUD / THB 24.31 GBP / USD 1.3118
AUD / EUR 0.6477 AUD / HKD 5.8494 NZD / USD 0.6904
AUD / GBP 0.5750 AUD / SGD 1.0305 NZD / EUR 0.5917
AUD / NZD 1.0959 AUD / FJD 1.5753 AUD / CNY 5.0312
AUD / CHF 0.7395 AUD / PGK 2.3991 All Ordinaries 6097.20
AUD / DKK 4.8075 EUR / USD 1.1518 Gold $US/oz 1278.15
AUD / SEK 6.3358 EUR / GBP 0.8895 Oil WTC $/b 56.72

 

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