13th October 2020 - China’s ban on Australian coal could see the AUD break lower


Good Morning,

Market Headlines

Wall Street's benchmark stock indices rallied strongly on Monday. The Dow climbed 0.88%, while the S&P 500 gained 1.64% & the Nasdaq rising 2.56%. The moves were fuelled by expectations of a coronavirus relief package. It looks like the administration wants a deal done before the election which has led to a rally in Amazon, Apple and other technology stocks ahead quarterly earnings season. Commodities, Brent crude oil futures fell 2.5% to $41.75, copper fell 0.6%, iron ore fell 1.4% to $124.00, and gold fell 0.4%.

Currency

AUD/USD: 0.7203 – 0.7232

EUR/USD: 1.1787 – 1.1823

GBP/USD: 1.3006 – 1.3083

USD/JPY: 105.25 – 105.61

USD/CAD: 1.3102 – 1.3138

NZD/USD: 0.6644– 0.6664

AUD/JPY: 75.83 – 76.34

AUD/NZD: 1.0831 – 1.0859

AUD Thoughts

A data heavy day beginning in China with September Trade Balance numbers being released, the global economic rebound is expected to support a further widening of the trade balance in Sep (prior: 58.93USD, 60USD).

Eurozone, the ZEW survey of expectations rose to a 16yr high of 73.9 on recovery hopes. COVID’s resurgence is now expected to drive a reversal. Germany’s Sep’s CPI will likely see weak consumption and the VAT sales-tax cut continue to dampen prices (prior and market f/c: -0.2%). UK, modest deterioration in the ILO unemployment rate to 4.3% is anticipated in Aug. As the government’s furlough scheme winds down, further weakness will be seen.

The US has CPI which is expected to moderate to 0.2% after months of pandemic-impacted gains as the rent and services components remain weak.

AUD/USD has traded in a range of 0.7203/.7232 this week but given the announcement regarding China’s ban on Australian coal could see the pair break lower. Demand is expected in the 0.7140/50 region and again ahead of 0.7100 while offering interest likely remains around 0.7290/00.

Event Risk Data Today

China: September Trade Balance (prior: 58.93USD, 60USD).

Eurozone: ZEW survey of expectations

Germany: September CPI will likely see weak consumption and the VAT sales-tax cut continue to dampen prices (prior and market f/c: -0.2%).

UK: September Jobless Claims and August Unemployment Rate

US: CPI

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