OVERNIGHT DATA AND HEADLINES
• U.S. President Trump dangled the prospect of completing an initial trade deal with China "soon" but offered no new details on negotiations in a campaign-style speech touting his administration's economic record. Markets had been on edge about Trump's highly anticipated remarks to The Economic Club of New York, but barely moved after the speech, which contained no major policy announcements. Trump said U.S. and Chinese negotiators were "close" to a "phase one" trade deal, but largely repeated well-worn rhetoric about China's "cheating" on trade. "They are dying to make a deal. We're the ones that are deciding whether or not we want to make a deal,".
• Trump also took aim at the Federal Reserve's monetary policy decisions that have left U.S. interest rates higher than many other economies and said he would prefer negative rates. "Remember we are actively competing with nations that openly cut interest rates so that many are now actually getting paid when they pay off their loan, known as negative interest. Who ever heard of such a thing?" he told members of the Economic Club of New York.
• U.S. stocks rose to record highs as trade-sensitive technology stocks gained. Dow Jones -15 points (0.06%) 27,675, S&P 500 +2 points (0.08%) 3,089 and Nasdaq +10 points (0.12%) 8,474.
• The USD was broadly stronger – the dollar index (DXY) was up 0.13%, last trading at 98.33.
• EUR weakened overnight, falling from 1.1035 down to 1.1005.
• GBP improved into the NY close, jumping up from 1.2820 lows towards 1.2860.
• China's yuan made some early modest gains to 6.9960 however retraced back up towards 7.0066.
• AUD remained on course for its third straight session of losses, down 0.2% towards a 0.6830 low
• NZD slipped as traders wagered on a higher probability of a rate cut this week – NZD falling from 0.6360 to 0.6325.
• AUDEUR managed to break through 0.6200 supports (0.6195 lows) but jumped back up towards 0.6215 into the close.
• AUDNZD saw a major jump higher yesterday, jumping up from 1.0755 lows towards 1.0815 highs on increased expectations of an RBNZ 25bp rate cut today.
• U.S. Treasury yields held below three-month highs after President Donald Trump reiterated that the U.S. is close to signing a trade deal with China, and before consumer price inflation data on Wednesday.
• Benchmark 10-year notes gained 3/32 in price to yield 1.92%.
• European bonds fell - yields on benchmark 10-year Spanish government debt rose three basis points to 0.45%. Spreads over comparable French debt widened to a one-month high of around 40 bps.
• Gold fell to its lowest in more than three months on increased appetite for riskier assets however rebounded after Trump comments. Spot gold slipped 0.6% to $1,447 per ounce but ended up $1,458.
• China's steel futures bounced back, snapping three sessions of losses, as fresh winter anti-pollution plans issued by the environment ministry raised supply concerns. Benchmark spot 62% iron ore for delivery to China dropped 3.1% to $79.5 a tonne from Nov.8, the lowest level since Jan. 29.
• Copper fell to a one-week low - Benchmark LME copper ended down 0.2% at $5,869 per tonne, falling for a third straight day.
• Oil rose about 1% as markets from stocks to bonds to commodities were supported by hopes that U.S. President Donald Trump may signal progress on trade talks with China. Brent crude was up 67 cents, or 1.1%, at $62.85 a barrel. West Texas Intermediate (WTI) crude rose 68 cents, or 1.2%, to $57.54.
ECONOMIC CALENDAR TODAY
• Australian Economic data today – November Consumer sentiment & Q3 wage cost index (last 0.6%, market expecting 0.5% with a subdued underlying trend).
• New Zealand – RBNZ policy decision this morning (market expecting a 25bp cut from 1.00% to 0.75%).
• Europe – September industrial production
• U.K. – October core CPI (has cooled to be back below the 2% target)
• U.S. – October core CPI & Fed speak from Powell & Kashkari.
AUD remained relatively subdued overnight, falling from 0.6857 highs down towards 0.6830, as it failed to make any direction even after Trump’s speech and a massive lift in AUDNZD cross buying.
The U.S. index was broadly stronger & risk sentiment remained on the backfoot which kept AUD in check as well as AU-US spreads which continued to weigh on any AUD price improvements.
Today we have Australian consumer sentiment & Q3 wage cost index releases – both releases expected to be on the more pessimistic side.
Main highlight today moves over to New Zealand for the RBNZ interest rate decision. New Zealand's inflation expectations fell from 1.86% to 1.80% in the fourth quarter yesterday, sending NZD lower and adding further weight to the view that the central bank will cut rates today. The bank has struggled to support inflation around the 2% midpoint of its target band, with the number slipping to 1.5% in September.
Tonight’s data will focus on the U.S. CPI releases – last 2.4% and market expecting no change. Fed Chair Powell will address the congressional joint Economic committee and Fed member Kashkari will be speaking as well.
For the AUD, persistence remains with a continuation in support down at these levels. No significant rally on the back of Trump’s comments overnight (provided USD strength if anything).
Continue to monitor levels from here – my bias is towards the downside with an eventual test of 0.6810 supports.
AUD shorts stall at the trend line - 10-day low set as AUD nears the trend line from October's low.
RSIs fall, AUD below 10 & 21-DMAs; techs suggests downside risks remain. AU Q3 wage price index, RBNZ rate decision are risks today.