1st December 2020 - Busy day ahead on the data front could see risk on activity


Good Morning,


Market Headlines

Amid month-end rebalancing, US equities fell, the S&P500 currently down 0.9%. The US dollar bounced off a two-year low, while US bond yields are slightly higher. Commodities: Brent crude oil futures fell 1.4%, copper rose 0.8%, iron ore rose 1.3% to $129.90, and gold fell 0.7%.


Currency

AUD/USD: 0.7348 – 0.7388

EUR/USD: 1.1942 – 1.2004

GBP/USD: 1.3305 – 1.3388

USD/JPY: 103.84 – 104.38

USD/CAD: 1.2923 – 1.2995

NZD/USD: 0.7012 – 0.7051

AUD/JPY: 76.68 – 76.94

AUD/NZD: 1.0462 – 1.0515


AUD Thoughts

A busy day ahead on the data front as well as the simmering tensions between China and Australia could see risk on activity. The RBA meets today set to remain in “watch and wait mode” and is unlikely to announce any additional moves at its December meeting (mkt f/c: 0.10%). The Board will affirm that is prepared to do more if needed.


The political unrest and trade jostling between Australia and China saw the AUD/USD trade to a low of 0.7345 with demand at 0.7320 and again at0 .7300 likely to provide the first resistance while offering interest is thin until we get to 0.7500.


Event Risk Data Today

Australia: The CoreLogic home value index will be buoyed by Melbourne’s reopening – The market is looking for a 0.6% rise in November. The ABS will then release “Weekly Payroll Jobs and Wages” for the week ended Nov 14; a timely indicator, but it failed to capture October’s big employment gain. Supported by the Home-Builder scheme and the broader reopening, The market expects that October dwelling approvals will retrace 3% but hold onto much of September’s outsized increase. Q3 net exports are set to detract 1.7ppts from GDP, a result of surging imports as supply lines are restored and the economy reopens. Although the current account balance has fallen from its record high, it will post its 6th consecutive surplus in Q3 (mkt f/c: $6.5bn). To round out the partial data, Q3 public demand should see a sizeable 1.2% increase.


Turning to monetary policy, The RBA is set to remain in “watch and wait mode” and is unlikely to announce any additional moves at its December meeting (mkt f/c: 0.10%). The Board will affirm that is prepared to do more if needed.


Finally, the November update of the AiG PMI will be published.


China: The November Caixin manufacturing PMI should remain robust (market f/c: 53.5); the official index currently sits at a 3-year high.


Asia: November Nikkei manufacturing PMIs will be released for Malaysia, Indonesia, South Korea, Taiwan, and India.


Euro Area: Another anaemic read in the November CPI should prompt ECB action at the December meeting (market f/c: -0.3%).


US: The ISM manufacturing index is set to pull back from its two-year high (market f/c: 58.0). Construction spending should post a 0.8% increase, with strong residential construction outweighing weaker non-res. Finally Chair Powell (02:00 AEDT), Brainard (04:00 AEDT), Daly (05:15 AEDT) and Evans (07:00 AEDT)will speak.

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