20th September 2021 - Risk-off tone for APAC, a USD win-win scenario, bad for AUD

Market Headlines

US equity sentiment was weak, the S&P500 closing down 0.9%. Familiar themes were cited: pandemic affected growth, Fed tapering, and tax increases. Risk sensitive currencies followed suit, while bond yields rose. Commodities, Brent crude oil futures fell 0.4% to $75, copper fell 0.8%, gold rose 0.1%, and iron ore fell 5.8% to $100 – a 15-month low.

Overnight Currency Range

AUD/USD 0.7262 0.7321

EUR/USD 1.1724 1.1789

GBP/USD 1.3725 1.3811

USD/JPY 109.67 110.08

NZD/USD 0.7026 0.7085

USD/CAD 1.2638 1.2774

USD/CNH 6.4444 6.4735

AUD/JPY 79.81 80.49

AUD/NZD 1.0310 1.0347

AUD Thoughts

The open could be in for a risk-off ride to start the week due to China's embattled developer, Evergrande, being on the brink of default.

The potential fallout of Evergrande could have contagion implications that spill outside China’s financial market borders, especially for the commodities markets. Tomorrow’s RBA minutes will be closely watched looking for any dovish overtones from Governor Lowe while Thursday mornings FOMC meeting shapes to be the major event for the week.

The AUD/USD continued to come under heavy selling pressure into the weekend on its way to a low of 0.7262. Minor demand can be expected in the 0.7240/50 region before further support at 0.7130/40. Offering interest remains thick above 0.7300

Event Risk Data Today

New Zealand: The August Business NZ PSI is likely to fall due to the return to Alert Level 4.

China: Mid-autumn festival public holiday from the 19th to the 21st of September.

UK: The Rightmove measure of house prices should reflect robust demand in September.

US: The NAHB homebuilder confidence survey for September is expected to show sentiment under pressure from supply shortages and input prices (market f/c: 74).

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