15th March 2021 - Fiscal stimulus and yields provide support to the greenback

Good Morning,

Market Headlines

Wall Street closed mixed on Friday, with the DJIA and the S&P reaching all-time highs, but the Nasdaq falling amid the persistent sell-off in the tech sector. Vaccine rollout and fiscal stimulus lift hopes for a sooner economic comeback in the US.

US 2yr treasury yields roundtripped from 0.15% to 0.16% and back, while the 10yr yield rose from 1.55% to 1.64% - possibly influenced by European yields which rose after a Bloomberg report confirmed the ECB’s increased bond purchase pace did not constitute additional stimulus.

Commodities, Brent crude oil futures fell 0.6% to $69.20, copper was little changed, iron ore fell 3.5% to $165.60, and gold rose 0.3%

Overnight Currency Ranges

AUD/USD 0.7724 0.7790

EUR/USD 1.1915 1.1990

GBP/USD 1.3918 1.3987

USD/JPY 108.36 108.815

NZD/USD 0.7186 0.7240

USD/CAD 1.2538 1.2623

USD/CNH 6.4812 6.5044

AUD/JPY 83.72 84.53

AUD/NZD 1.074 1.0778

AUD Thoughts

China data dump will kick off the week with markets paying particularly close attention following the data vacuum period induced by the Chinese New Year holiday. Data for Jan-Feb is expected to surge on a YoY basis given base effects from the slump in 1Q20.

AUD/USD remained well supported during the back end of last week and closed at 0.7757. Further offering interest at 0.7820 should keep a lid on things early in the week while buying interest should materialise if we drift back toward 0.7620/40.

Event Risk Data Today

Australia: At 10:15am, RBA Governor Lowe will give opening remarks at the Melbourne Business Analytics Conference.

New Zealand: The February Business NZ PSI is due; the survey has revealed that the border closure is weighing heavily on the services sector. January net migration will continue to stay near zero on the border closures.

China: January industrial production (market f/c: 32.6%yr ytd), investment (market f/c: 41.5%yr ytd) and retail (market f/c: 32.0%yr ytd) are all expected to spike on base effects and China’s booming recovery.

US: The Fed Empire state index has recently shown a marked improvement in capex intentions. The survey will continue to be supported by the vaccine rollout and improving conditions in the New York area (market f/c: 14.0).

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