OVERNIGHT DATA AND HEADLINES
• Shares in Europe dipped, Wall Street backed off record highs and the USD was poised to extend a three-day losing streak as underwhelming earnings and uncertainty over an ongoing U.S. impeachment inquiry overshadowed hopes for a U.S.-China trade deal.
• U.S. homebuilding rebounded in October and permits for future home construction jumped to a more than 12-year high, pointing to strength in the housing market amid lower mortgage rates. Housing starts increased 3.8% to a seasonally adjusted annual rate of 1.314 million units last month, with single-family construction rising for a fifth straight month and activity in the volatile multi-family sector rebounding solidly. Housing starts advanced 8.5% on a year-on-year basis in October. Building permits surged 5.0% to a rate of 1.461 million units in October, the highest level since May 2007. Permits were driven by the single-family housing segment, which increased 3.2% to the highest level since August 2007.
• Talks continued on an interim deal toward resolving the 18-month, market-rattling trade dispute that has damaged supply chains and upset global markets, even as Washington is set to impose a new round of tariffs on Chinese goods on Dec. 15. But as the impeachment hearings in the U.S. House of Representatives gained momentum, the end game of the U.S.-China trade war grew increasingly foggy. The inquiry focuses on a July 25 phone call in which President Donald Trump asked Ukrainian President Volodymyr Zelenskiy to carry out two investigations that would benefit him politically.
• U.S. stocks slipped from record levels as dour forecasts eroded confidence. Dow Jones fell 112 points (0.40%) at 27,924, S&P 500 fell 3 points (0.09%) at 3,119.14, Nasdaq up 20 points at 8,570.06.
• The U.S. DXY was nominally lower, giving up early gains to end the session at 97.85.
• JPY strengthened 0.12%, falling from 108.80 towards 108.45.
• GBP fell from 1.2965 highs gown towards 1.2908 lows.
• EUR found some renewed strength, up from 1.1062 lows towards 1.1083.
• CNY hit a two-week low, opening at 7.0288 to hit a low of 7.0295.
• AUD regained yesterday’s losses after the RBA minutes saw it fall to 0.6782 lows. AUD staged a recovery towards 0.6834 highs.
• NZD rallied from 0.6380 lows all the way up towards 0.6430.
• AUDNZD fell from a 1.0645 high down towards 1.0618 into the NY close.
• AUDEUR rebounded from 0.6132 lows up towards 0.6165 highs.
• U.S. long-dated Treasury yields, which have fallen in five of the last six sessions, slipped again, with risk appetite weaker overall amid the persistent uncertainty over U.S.-China trade negotiations.
• Benchmark 10-year notes last rose 4/32 in price to yield 1.795%, from 1.808% late on Monday.
• The 30-year bond last rose 16/32 in price to yield 2.2704%, from 2.293% late on Monday.
• Gold pared losses to scale a one-week peak as Wall Street eased from record highs on U.S. political uncertainties. Spot gold inched up 0.2% to $1,475 per ounce.
• Chinese iron ore futures recouped early losses to extend their rally into a sixth straight session as steel prices stretched gains amid shrinking inventories and possible fresh output restrictions to curb air pollution. Benchmark spot 62% iron ore was at $86 a tonne, extending its rebound from last week's nine-month low.
• Copper rose - Three-month LME copper ended 0.8% higher at $5,875 a tonne.
• Oil fell about 2% on concerns about excess global crude supply and limited progress toward resolving a U.S.-China trade dispute. Brent crude futures fell $1.08 (1.7%) to $61.36 a barrel. U.S. WTI crude futures fell $1.32 (2.3%) to $55.73 a barrel.
ECONOMIC CALENDAR TODAY
• Australian Economic data today : October Westpac-MI leading index (suggests continued below trend growth).
• New Zealand – Global Dairy trade auction
• U.S. – FOMC minutes will be released (discussion of risks to be the focus).
• Canada – October CPI (inflation close to target, signs it is gradually firming).
AUD staged an impressive rebound overnight from 0.6782 lows towards 0.6834 after the November RBA minutes failed to deliver a significant drop.
The RBA November minutes were interpreted as dovish as they left open the possibility for a cut. The minutes shed some additional light on the decision to leave the policy rate unchanged on Melbourne Cup Day. It appears that the ‘on hold’ decision was not made lightly as, “the Board agreed that a case could be made to ease monetary policy at this meeting”. It was decided, however, that the most appropriate approach would be to leave the cash rate unchanged and assess the effects of the recent easing.
AUD spiked down but the move quickly reversed – most likely attributed to unaltered expectations for the RBA. Australia's October employment report increased the probability for RBA cuts but rates markets have reduced the chance for cuts after the minutes. Meanwhile, probabilities for Fed easing have increased slightly as short-term rates markets now expect a 25bps cut in either July or September of 2020.
Today in Australia we have the leading index data suggesting continued below trend growth. The main focus will shift to the release of the FOMC minutes tonight.
For the AUD, suggest a range bound session today with any potential gains capped around 0.6850.
Probability of RBA cuts unchanged after "dovish" minutes - Daily cloud top stems RBA induced slide, AUD sharp bounce.
AUD climbs above 0.6830, little pull back as US DXY remains offered. Daily bull hammer, cloud support give daily techs a bullish tint - longs need a break above 0.6840/65 (cluster of moving averages) in order to get greater control of any further AUD advance. A break of 0.6840/65 resistance will drive short covering – next major level the 200-DMA and October's high (0.6935).