19th October 2020 - Today’s 3Q20 China GDP data will be the regional focus of the week


Good Morning,

Market Headlines

US equity markets finishing the session (and the week) flattish with all three U.S equity indices pairing back gains made throughout the week. Bond yields rose slightly, while the US dollar fell slightly, US retail sales data was strong, but industrial production disappointed. Commodities, Brent crude oil futures fell 0.5% to $42.95, copper fell 0.6%, iron ore rose 0.5% to $119.05, and gold fell 0.5%

Currency

AUD/USD: 0.7072 – 0.7095

EUR/USD: 1.1695 – 1.1746

GBP/USD: 1.2860 – 1.2962

USD/JPY: 105.20 – 105.44

USD/CAD: 1.3178 – 1.3236

NZD/USD: 0.6587– 0.6618

AUD/JPY: 74.39 – 74.74

AUD/NZD: 1.0713 – 1.0737

AUD Thoughts

The AUD has dropped nearly 2% last week weighed by US dollar strength amid a generalized rush for safety. The pair extended its reversal from last week’s highs at 0.7245, to reach two-week lows at 0.7050 before posting a mild recovery attempt on Friday, that has been capped right below 0.7100.

On the upside, a convincing break beyond the mentioned 0.7095 level might increase bullish momentum, driving the pair towards 0.7145 (October 15 high) and 0.7210/ 20 (October 13 high/intraday level). On the flipside, initial support lies at 0.7055 (October 15 low). Before here, the pair would resume the downtrend heading towards 0.7030 (September 28 low) and 0.7000 (September 25 low).

Event Risk Data Today

China: Government stimulus has supported fixed asset investment, particularly in infrastructure and utilities; private investment growth is now accelerating too (prior: -0.3%ytd/yr, market f/c: 0.9%ytd/yr). Industrial production is being bolstered by firmer domestic and external demand (prior: 0.4%, market f/c: 1.0%). Retail sales in Sep meanwhile were supported by the loosening of restrictions and spending ahead of ‘Golden Week’ (prior: 0.5%, market f/c: 1.8%). These broad-based gains will support a robust print for GDP in Q3 (prior: 3.2%yr, market f/c: 5.5%yr).

Europe: ECB President Lagarde will deliver the opening remarks at the ECB’s Conference on Monetary Policy.

UK: Rightmove house prices were up 5%/yr in September, the property tax break and increased sales outside of metropolitan areas boosting the housing market.

US: The NAHB homebuilder sentiment survey has remained elevated, with the NAHB citing lower mortgage rates and demand for suburban homes as key supports (prior and market f/c: 83).

US: The FOMC’s Bostic (05:20 AEST) and Harker (0 6:00 AEST) will speak.

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