17th December 2020 - AUD/USD bulls capped on less dovish than expected Fed


Good Morning,


Market Headlines

Sentiment was mixed overnight with the S&P500 relatively unchanged on the day. Bond yields probed the upside whilst US stimulus and Brexit talks continued, US retail sales data disappointed, and the Fed remained on hold. Commodities, Brent crude oil futures rose 0.6% to $51.10, copper rose 0.3%, iron ore rose 0.9% to $156.35, and gold rose 0.4%.


Currency

AUD/USD: 0.7539 – 0.7578 (2 ½ year high)

EUR/USD: 1.2125 – 1.2212 (highest level since April 2018)

GBP/USD: 1.3436 – 1.3555

USD/JPY: 103.26 – 103.91

USD/CAD: 1.2707 – 1.2790

NZD/USD: 0.7056 – 0.7121 (3-year high)

AUD/JPY: 78.16 – 78.42

AUD/NZD: 1.0641 – 1.0690


AUD Thoughts

A busy day ahead on the data font kicking off with New Zealand's Q3 GDP. The data is expected to have bounced back in the September quarter following the easing of Covid–related activity restrictions. Market forecast suggest that GDP is almost back to where it was at the end of last year, before the Covid shock (f/c: +13.0%).


Locally we have labour force data for November where market anticipates that 75k jobs were created in the November. The market anticipates that Victoria to drive the participation rate higher, 75k forecast gain in employment will only be enough to hold unemployment flat at 7.0%.


To the US we have the December Philadelphia Fed index is expected to moderate (market f/c: 20.0), and initial jobless claims should pull back after last week’s spike (market f/c: 813k). November housing starts (market f/c: 0.3%) and building permits (market f/c: 1.0%) will both reflect strong labour market conditions.


AUD/USD made new marginal high of 0.7578 overnight with further offering interest now expected ahead of 0.7600 and again at 0.7675. Demand likely rests ahead of 0.7500.


Event Risk Data Today

Australia: The market anticipates that 75k jobs were created in the November ABS labour force survey. We expect Victoria to drive the participation rate higher, 75k forecast gain in employment will only be enough to hold unemployment flat at 7.0%.


New Zealand: New Zealand’s economy has bounced back in the September quarter following the easing of Covid–related activity restrictions. Market forecast suggest that GDP is almost back to where it was at the end of last year, before the Covid shock (f/c: +13.0%).


UK: BOE December policy decision – easing is likely in coming months despite the vaccine.


US: The December Philadelphia Fed index is expected to moderate (market f/c: 20.0), and initial jobless claims should pull back after last week’s spike (market f/c: 813k). November housing starts (market f/c: 0.3%) and building permits (market f/c: 1.0%) will both reflect strong labour market conditions.

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