Overnight Market Activity
· The US 10yr treasury yield ranged between 2.54% and 2.57%, the 2yr yield between 2.39% to 2.41%.
· The chances of a Fed rate cut by December, implied by Fed fund futures, remained at 50%.
· Gold fell to its lowest in more than a week as hopes the United States and China would reach a trade deal lifted appetite for riskier asset even as the dollar retreated.
· China's Shanghai steel futures hit a 7-1/2-year high, supported by firm demand and expectations that the government will boost stimulus measures to support infrastructure projects.
· EUR ranged between 1.1300 and 1.1320
· USD/JPY ranged between 111.90 and 112.10
· AUD ranged between 0.7160 and 0.7180
· NZD slipped from 0.6780 to 0.6750
· AUDNZD rose from 1.0585 to 1.0620
· AUDEUR remained capped ahead of 0.6350, trading in between 0.6320/0.6345
AUD hovered near its highest in almost seven weeks, helped by U.S. Treasury Secretary Steven Mnuchin voicing optimism for a trade deal with China to end a tariff war. AUD was last at 0.7172, not far from Friday's 0.7192 which was its highest level since late February. Australia will particularly welcome an end to the Sino-U.S. trade war as China is Australia's largest export market.
The domestic focus shifts to the Reserve Bank of Australia's (RBA) minutes of April meeting due today and employment/unemployment data on Thursday.
There are political uncertainties too for the AUD with polls show the incumbent Liberal-National coalition is headed for a defeat in a federal election next month. The AUD is susceptible to significant weak-side surprises in this week's labour market data or next week's first-quarter (inflation) release. Still, a Sino-US trade deal is expected and with that improved prospects for stronger growth in China and elsewhere as a likely net AUD-positive, including via providing support for commodity prices and underpinning what is admittedly already supportive risk sentiment.
AUD bulls hope for further U.S.-China trade progress. AUD ends NY 0.7167. Global trade optimism, less dovish RBA boost AUD.
AUD shrugs off drop in oil, metals; awaits progress on China-U.S. trade. Bullish technical hints at run to 200-DMA at 0.7193. Bulls need solid Asia growth, hawkish RBA to make run at 2019 high 0.7296. Support at 100-DMA 0.7109, then April 3/4 low area by 0.7050.
Event Risk News & Data Today
· Mar RBA minutes are released after the concluding paragraph in the Governor’s Statement was changed to note that the Board are monitoring developments.
· Euro Area: Apr ZEW survey of expectations is released with the last few reads showing more stable results following the downtrend.
· US: Mar industrial production is expected to post a moderate gain of 0.3%. Apr NAHB housing market index is expected to rise to 64 from 62 on continued support from lower long-end rates.
· Fedspeak involves Rosengren in North Carolina and Kaplan in a Q&A