OVERNIGHT DATA AND HEADLINES
• German IFO survey for December came in better than expected at 96.3 with both expectations and the current assessment higher than forecast.
• UK CPI printed at an annual rate of 1.5% in November (forecast 1.5%). EZ CPI was unchanged from the prior reading at 1% with no reaction from markets.
• The ECB’s Coeure said that the Central Bank could indicate tolerance band for inflation but that any band would not be an invitation for inaction or complacency.
• Canadian CPI for November printed at -0.1% MoM and +2.2% YoY, both matching expectations. Core measures also matched or slightly exceeded expectations.
• Fed’s Williams said that monetary policy is in a good place and is accommodative and supporting growth. He noted that there were still some significant risks to the downside but it would take a material change in the outlook to affect policy.
• USD gained as improving economic data squashed the likelihood of a Federal Reserve interest rate cut in 2020, while global equity markets extended a rally that again pushed key indices on Wall Street to record highs.
• The S&P 500 and Nasdaq inched to all-time highs extending a record-setting run - Dow Jones was up 0.09% at 28,292, the S&P 500 up 0.12% at 3,196 and the Nasdaq up 0.29% at 8,848.
• The USD rose – DXY index up 0.18% to 97.40 - two days in a row for the first time since the last week of November.
• GBP tested the Dec. 12 low near 1.3050 but recouped losses to close at 1.3085.
• EUR found selling interest down towards 1.1109 lows from 1.1150.
• China's CNY inched lower, opening at 6.9990 and was changing hands at 7.0075 (107 pips weaker than the previous late session close).
• AUD marked time ahead of monthly employment data – AUD up 0.03% at 0.6852 after revisiting 0.6836 lows overnight.
• NZD made some gains jumping up from 0.6550 lows towards a 0.6590 high.
• AUDNZD remained in its recent 1.0400 / 1.0440 ranges, closing midway at 1.0420.
• AUDEUR gained 0.34% jumping up from 0.6135 towards 0.6170 highs.
• U.S. Treasury yields rose as investors shrugged off the likely impeachment of U.S. President Donald Trump and focused on positive economic signs.
• The 10-year yield was up 3.1 basis points at 1.920% (has risen steadily over the course of the month from a low of 1.6930% on Dec 3). The two-year yield was unchanged at 1.633%.
• Euro zone bond yields rose after more upbeat European economic data. Most 10-year bond yields were up 4 basis points with Germany's 10-year Bund yield at -0.26%.
• Gold dipped, weighed down by a firmer USD. Spot gold fell -0.07% to $1,475 per ounce.
• Shanghai steel futures gave up early gains to trade slightly lower as supply concerns eased after China's top steel producing city removed a smog alert. Prices for spot cargoes of iron ore with 62% iron content for delivery to China dropped $0.5 to $95 per tonne.
• Copper prices dipped from the previous session's 7-month high. LME 3 month copper was bid down 0.5% at $6,172 a tonne after touching $6,223 on Tuesday (highest since May 8).
• Oil prices steadied after U.S. government data showed a decline in crude inventories and expectations for demand next year. Brent futures up 17 cents to $66.27 a barrel. U.S. WTI rose 12 cents to $61.06 a barrel.
EVENT RISK TODAY
• Australian Economic data today - November employment, '000 chg (last –19k, market f/cast +15k). Business surveys continue to paint a softer jobs picture.
• Australian November unemployment rate - (last 5.3%, market f/cast 5.3%). Unemployment expectations continue to rise.
• New Zealand - Q3 GDP (last 0.5%, market f/cast 0.5%). Shaping up to be the low point for growth this year.
• New Zealand - Nov trade balance $m (last –1013, market f/cast –800). Stronger meat and dairy export prices.
• Japan - BOJ policy decision – Easing bias to be retained with focus on global risks.
• UK - Nov retail sales (last 2.7%, market f/cast 2.1%). Consumer remains in reasonable shape.
• BoE policy decision (last 0.75%, market f/cast 0.75%). No change expected – on hold. Watching economy's response to election result.
• US - Dec Phily Fed index. Initial jobless claims (last 252k). Nov leading index (last –0.1%, market f/cast +0.1%). Pointing to growth around trend. Nov existing home sales (last1.9%, market f/cast –0.2%).
AUD marked time overnight, trading within recent 0.6835 / 0.6865 ranges as it awaits today’s employment / unemployment data.
USD was generally stronger across the board with a continuation in weakness from major currencies GBP & EUR.
Yesterday’s Leading Index growth rate was weaker than expected and continues to deteriorate (over the last six months from –0.17% in June to –0.81% in November). The main components driving the 0.64ppt shift have been a sell-off in commodity prices (–0.65ppts) and a more mixed performance on the Australian share market (–0.28ppts). The period has also seen a slightly bigger drag from renewed weakness in dwelling approvals (–0.08ppts) and the Consumer Expectations Index (–0.05ppts). This has been partially offset by a widening yield spread as the RBA’s cuts in the cash rate have lowered short term rates (+0.23ppts) and a reduced drag from US industrial production (+0.15ppts).
Focus today turns to Australian November employment data (11.30am) where disappointment could bring forward the timing of another RBA rate cut. Market expectations are for an 15k increase in headline jobs with the unemployment rate to remain at 5.30%.
Tonight’s focus will remain on the U.K. & U.S. with BoE announcement and other tier 1 releases.
For the AUD, await today’s jobs data for further direction. Barring any surprises suspect AUD to remain in recent ranges with a downward bias to test lower into the remainder of this year.
AUD lifts above the daily cloud top & 10 day moving average - 10 day moving average acts magnetically ahead of key jobs report.
Technicals suggests longs still have some hope. A downbeat result likely drives AUD below the Dec 10 low & daily cloud base.
Stops likely below those supports, if run 0.6750/55 support is then targeted. An upbeat result could lift AUD above the 200-DMA & towards Dec's high.