Overnight Market & Currency Developments – From Our Bankers

Overnight Developments:

  • USD is slightly firmer against most major currencies and US 10-year Treasury yields rose by roughly 3bps to 2.23%. There was no fundamental catalyst behind the USD performance overnight. Thursday’s FOMC meeting and Summary of Economic Projections will be the main driver of near-term USD movement. The FOMC is widely expected to leave the target range for the federal funds rate between 1.00-1.25%. Expectations are also for the FOMC to begin reducing (or at the very least announce when they plan to begin reducing) the Fed’s balance sheet.

In the Summary of Economic Projections, the FOMC will likely lower their near-term GDP growth projection to account for the fallout from Hurricanes Harvey and Irma. More importantly, we anticipate the FOMC to lower its US core PCE deflator projections and longer term median Fed funds rate estimate. This will weigh on US interest rate futures and limit USD upside.

  • AUD/USD drifted lower overnight on USD strength. AUD highlight today is the RBA September meeting Minutes (11:30am Sydney). Judging from Governor Lowe’s recent comments, the Minutes will have a special discussion on the Chinese economy, no doubt including the medium-term problems of China’s high corporate debt. This can temporarily weigh on AUD.


Overnight Data:

  • The US National Association of Home Builders (NAHB) housing market index fell from +67 to +64 in September (forecast +67). The index of home sales over the next six months fell from +77 to +73.


Global Equity Markets:                                                                                                                  

  • European share markets rose on Monday with the benchmark STOXX 600 up 0.3% to near 6‑week highs. Shares in Portugal rose 1.6% after the country regained its investment grade rating. Standard and Poor’s lifted Portugal’s credit rating from BB+ to BBB‑. And UK Bank of England Governor Mark Carney said that the central bank would most likely raise rates in coming months but only gradually. The German Dax was up by 0.3% and the UK FTSE gained 0.5%. In London trade, shares in Rio Tinto rose by 1.4% while BHP edged 0.1% higher.
  • US share markets rose on Monday with the Dow Jones and S&P 500 indexes both at fresh record highs. Financials led the gains ahead of the two‑day Federal Reserve meeting while utilities and real estate stocks were weaker. Defence contractor Northrop Grumman said it would buy missile‑maker Orbital ATK for $7.8 billion. The Dow Jones rose by 63 points or 0.3% to record highs with the S&P 500 up 0.2% to fresh record highs. The Nasdaq rose by 6 points or 0.1%.



  • Global oil prices ended mixed on Monday. Most traders and investors are still working through the implications for refineries and the broader oil market of recent hurricane activity. The number of oil rigs operating in the US fell to the lowest levels since June in the latest week. Brent crude fell by US14 cents or 0.3% to US$55.48 a barrel. US Nymex rose by US2 cents US$49.91 a barrel.
  • Base metal prices rose by up to 2.8% on the London Metal Exchange on Monday. All metals were higher, led by zinc. But aluminium and copper both rose just 0.2%. The December Comex gold futures price fell by US$14.40 or 1.1% to US$1,310.80 per ounce. The spot gold price was trading around US$1,308 an ounce in late US trade. Iron ore fell by US10 cents to US$70.80 a tonne.



  • In Australia, RBA September Board minutes, weekly consumer confidence and ABS QII residential property price indices are out
  • In the US, the Federal Reserve starts a 2‑day meeting. Housing starts, weekly chain store sales and the June quarter current account are released.


Indicative Rates (Bank to Sell):

AUD / USD 0.7911 AUD / CAD 0.9644 USD / JPY 111.53
AUD / JPY 87.85 AUD / THB 25.44 GBP / USD 1.3497
AUD / EUR 0.6602 AUD / HKD 6.1233 NZD / USD 0.7263
AUD / GBP 0.5836 AUD / SGD 1.0647 NZD / EUR 0.6076
AUD / NZD 1.0875 AUD / FJD 1.5984 AUD / CNY 5.2011
AUD / CHF 0.7456 AUD / PGK 2.5010 All Ordinaries 5778.98
AUD / DKK 4.9017 EUR / USD 1.1804 Gold $US/oz 1308.50
AUD / SEK 6.2839 EUR / GBP 0.8857 Oil WTC $/b 49.83



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