Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD fell to near a two‑week low and US 10‑year Treasury yields dipped by roughly 3bps to 2.38% overnight. The USD underperformed against most major currencies, especially EUR, largely because of encouraging Eurozone economic activity. Reports the White House is considering nominating Mohamed El‑Erian for Fed Vice Chair also appears to have weighed on USD. Judging from his recent comments, El‑Erian is more of a centrist on monetary policy rather than a hawk.
  • Faster US October producer price inflation and improving small business optimism failed to support the USD. This may be because a December 25bps Fed funds rate hike is already fully priced in. Fed Chair Janet Yellen’s comments did not have a material impact on USD. Yellen reiterated the FOMC’s view that future interest rate adjustments remain data dependent “so the Fed’s expectations for appropriate policy evolves over time in line with the outlook”.
  • Overall, we expect the USD to recover because the US tax legislative process is progressing at an encouraging pace. The Senate Finance Committee has started to mark up their version of the “Tax Cuts and Jobs Act”. The full House of Representatives votes on Thursday on their version of the tax plan.
  • AUD/USD traded within a narrow range overnight. USD weakness supported AUD/USD but lower commodity prices offered AUD/USD some upside resistance. AUD will be guided today by Australia’s Q3 wage price index (11:30am Sydney). We expect wages growth to accelerate from the current low rate of 1.9%pa to 2.1%pa in Q3 (consensus: 2.2%) because of the increase in the national minimum wage. From 1 July 2017, the national minimum wage rose 3.3%, compared to 2.4% at the last review in 2016. Faster wage growth in Australia (above 2.2%pa) can lead to an upward revision to Australian interest rate expectation in favour of AUD.


Overnight Data:

  • US producer prices rose by 0.4% in October (forecast +0.1%) while the core rate (excludes food and energy) rose by 0.4% (forecast +0.2%). The NFIB business optimism index rose from 103.0 to 103.8 in October. And chain store sales in the latest week were up 2.3% on a year ago, down from the 2.6% annual gain in the previous week.


Global Equity Markets:                                                                                                                   

  • European shares eased again on Tuesday. Falls in the basic resources and telco sectors outweighed gains in technology. Shares in telco, Altice, fell 13% after a broker downgrade. Reuters noted that the earnings season nears its end, and MSCI eurozone companies are up 9.9% over the year in US dollar terms, while 62% of companies in the euro zone index have beaten or met earnings estimates. The pan‑European STOXX 600 index fell for the sixth straight day, dropping 0.6%. The German Dax fell by 0.3%. The UK FTSE lost less than 0.1%. In London trade, shares in Rio Tinto fell by 2.9% while BHP fell by 2.5%.
  • US sharemarkets fell on Tuesday but indices were well off the lows in afternoon trade. The energy sector was lower in response to a fall in the oil price. And shares in General Electric continued to fall, down 5%. With an hour of trade to go the Dow Jones was lower by 40 points or 0.2% after being down 168 points in early trade. The S&P 500 was down by 0.3% and the Nasdaq lost 28 points or 0.4%.



  • Global oil prices fell by 1.5‑2.0% on Tuesday. Commodity prices generally eased in response to softer‑than‑expected Chinese economic data. And the International Energy Agency (IEA) cut its forecast for global demand growth for 2018. The IEA cut its oil demand growth forecast by 100,000 barrels per day (bpd) for this year and next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018. Brent crude fell by US95 cents or 1.5% to US$62.21 a barrel. US Nymex fell by US$1.06 or 1.9% to US$55.70 a barrel.
  • Most base metal prices fell on Tuesday, led by nickel which fell by 5.7% on the London Metals Exchange. But tin only fell by 0.2%.he gold futures price rose by US$4.00 or 0.3% to $1,282.90 an ounce. The spot gold price was trading around US$1,281 an ounce in late US trade. Iron ore rose by US90 cents or 1.5% to US$62.80 a tonne.



  • In Australia, the monthly Westpac‑Melbourne Institute consumer confidence figures are released together with the wage price index.
  • In the US, data on consumer prices and retail sales are expected.


Indicative Rates (Bank to Sell):

AUD / USD 0.7584 AUD / CAD 0.9580 USD / JPY 113.45
AUD / JPY 85.66 AUD / THB 24.32 GBP / USD 1.3166
AUD / EUR 0.6412 AUD / HKD 5.8563 NZD / USD 0.6878
AUD / GBP 0.5735 AUD / SGD 1.0293 NZD / EUR 0.5830
AUD / NZD 1.1012 AUD / FJD 1.5763 AUD / CNY 5.0338
AUD / CHF 0.7353 AUD / PGK 2.4100 All Ordinaries 6048.71
AUD / DKK 4.7594 EUR / USD 1.1648 Gold $US/oz 1280.83
AUD / SEK 6.3529 EUR / GBP 0.8961 Oil WTC $/b 55.62


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