17th November 2020 - Risk flows help AUD start week on strong footing


Good Morning,

Market Headlines

Market sentiment was upbeat after Moderna reported that its experimental vaccine is 94.5% effective in preventing COVID-19. The S&P 500 was 0.8% higher, the Dow Jones 1.2% higher although the NASDAQ underperformed and gained 0.4%.

Currency

AUD/USD: 0.7282 – 0.7326

EUR/USD: 1.1815 – 1.1869

GBP/USD: 1.3167 – 1.3242

USD/JPY: 104.37 – 105.13

USD/CAD: 1.3067 – 1.3123

NZD/USD: 0.6863 – 0.6900

AUD/JPY: 76.06 – 76.76

AUD/NZD: 1.0591 – 1.0624

AUD Thoughts

After closing the previous week virtually unchanged, the AUD/USD pair gained traction on Monday and advanced to its highest level since September 9th at 0.7326. As of writing, the pair was up 0.75% on the day at 0.7322. Earlier in the day, RBA Governor Phillip Lowe said that negative rates as a policy option in Australia were still extraordinarily likely. "We would only consider negative rates if all the world's major banks had negative rates," Lowe added and these comments helped the AUD gather strength. Additionally, the data from China revealed that Industrial Production and Retail Sales both expanded at a firm pace in October and provided an additional boost to the China-proxy AUD.

Looking forward, RBA will release the minutes of its November meeting today (11:30am), at which the bank lowered its policy rate to 0.15% and announced AUD100 billion worth of QE. US’s retail sales for October are due this evening and should show another solid monthly gain as high frequency data suggests. The consumer remained firm through end-October. Momentum, however, has softened in early November, suggesting recent COVID spread may be taking its toll on spending.

The AUD/USD traded to a high of 0.7326 overnight spurred by the positive vaccine news from Moderna. Demand has likely followed spot higher and now sits at 0.7280 while further demand should rest nearer last week’s low 0.7220 and again at 0.7200. Offering interest at 0.7340 should cap us on the first attempt.

Event Risk Data Today

AU – RBA Minutes

AU – Weekly payroll data

CA – October housing starts

US – October retail sales

US – October IP

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