OVERNIGHT MARKET DATA AND HEADLINES
• The release of the FOMC Minutes may be remarkable only insofar as it shows little discord among the participants at Oct.’s policy meeting. That follows the several previous meetings with quite a lot of discord. Besides updates on the assessment of the economy and the usual discussion highlights, the Minutes included a review of the Fed’s program to supply “ample reserves” to the banking system – specifically, its USD 60bn of T-bill purchases per month - and the ongoing overnight and term repo programs. According to the minutes, most members judged the low level of interest rates as appropriate barring a 'material' reassessment of the outlook. Most policymakers said rate cut was warranted due to global weakness seen in growth. Some favoured keeping rates steady and argued outlook was favourable and inflation expected to rise.
• Global stock markets stumbled and the USD climbed after China condemned U.S. Senate legislation aimed at protecting human rights in Hong Kong, the latest obstacle to reaching a deal in a prolonged Sino-U.S. trade dispute that has weighed on growth worldwide. The U.S. Senate unanimously passed legislation aimed to protect human rights in Hong Kong amid China's crackdown on the pro-democracy protest movement. China's foreign ministry said the United States should stop interfering in Hong Kong and Chinese affairs.
• Wall Street's main indexes were lower on concerns that a "phase one" trade deal between Washington and Beijing may not be completed this year, and minutes from the Federal Reserve's October policy meeting offered little help. Dow Jones fell 190 points (0.68%) to 27,744, S&P 500 lost 19 points (0.61%) to 3,101 and the Nasdaq fell 66 points (0.77%) to 8,504.
• Canadian CPI for October came in at +0.3% MoM and +1.9% YoY with both results matching expectations.
• The U.S. DXY edged higher was up 0.06% at 97.914. The index rose as high as 98.038 earlier in the session.
• CNY slipped to a new two-week low in response to a much weaker midpoint. Midpoint rate was set at 7.0118 per dollar and weakened to 7.0380.
• EUR remained steady above 1.1060 after the FOMC minutes. Previously EUR spiked to 1.1081 but failed to break clearly above 1.1080 and pulled back modestly.
• GBP saw a small rebound up from 1.2884 lows up towards 1.2927.
• JPY weakened from 108.35 up towards 108.75.
• AUD fell from 0.6820 highs towards a 0.6787 low (just shy of the 0.6782 low touched on Tuesday’s RBA minutes release).
• NZD remained relatively range bound, finding a 0.6434 high towards 0.6405.
• AUDEUR dropped from a 0.6160 high down towards 0.6130 lows.
• AUDNZD dropped from 1.0620 down towards 1.0590 lows.
• U.S. long-dated yields fell to three-week lows, weighed down by renewed anxiety about trade talks with China after the U.S. Senate unanimously passed legislation aimed at protecting human rights in Hong Kong.
• Amid persistent trade tension, the U.S. yield curve continued to flatten, with the spread between the two-year and 10-year note yields hitting 15 basis points, the narrowest in three weeks. The yield spread has contracted for six straight sessions.
• The two-year yield was down 2.8 basis points at 1.57%. 10-year Treasury note yields were last down 5.6 basis points at 1.730%.
• Benchmark German bond yields held near their lowest levels so far this month as renewed concern about the direction of U.S.-China trade talks swept through world markets, denting stocks and boosting demand for safe-haven assets. Having traded in a narrow range for the past two sessions, 10-year yields across the euro area fell 3-4 bps each.
• Gold fell, retreating from a two-week high hit earlier in the session. Spot gold dipped 0.3% to $1,468 per ounce but recovered back towards $1,473 (having touched a two-week high of $1,478.80 earlier).
• Steel futures in China rose, with construction material rebar extending gains into a fifth session, as fresh anti-pollution measures raised concerns about lower production at mills.
• Copper prices touched one-week highs - Benchmark LME copper ended unchanged at $5,875 a tonne. Prices earlier touched $5,905.50, the highest level since Nov. 12.
• Oil prices rose more than 2% after a better-than-expected U.S. crude inventories report and as Russia said it would continue its cooperation with OPEC to keep the global oil market balanced. Brent crude futures were up $1.42, or 2.3%, to $62.33 a barrel while WTI crude futures gained $1.41, or 2.6%, to $56.62 a barrel.
ECONOMIC CALENDAR TODAY
• No Australian Economic data today.
• Europe – ECB minutes & Nov consumer confidence.
• U.S. – weekly jobless claims
• U.S. – November Philly Fed survey
• U.S. – October leading index & existing home sales.
• International – OECD Economic outlook
AUD traded heavy for the most part overnight as risk sentiment soured & selling interest was seen across most of the majors EUR, GBP, JPY & NZD.
Stocks & global bond yields dropped with a flight to USD safe haven & JPY (AUDJPY dropping).
Concerns over the stalling of negotiations in a US-China trade deal dominating investor thinking in the most recent sessions and overshadowing various data releases and Minutes from the FOMC.
Ahead this coming session we have the ECB Account of their October Policy Meeting which will provide the final words of outgoing ECB President Draghi while Friday will bring one of the first words from new ECB President Lagarde. Lagarde will deliver the keynote speech at Frankfurt European Banking Congress during Euro Finance Week. Can Lagarde possibly prove to be as dovish as her predecessor Draghi?
Another reasonably subdued session for AUD. Expect some further demand to emerge on any decent pullbacks for now with support towards the low’s from earlier this month nearer 0.6770. Offering from the 0.6740 region.
AUD longs cannot overcome trade concerns USD bid. AUD adds to overnight losses, slides below 55-DMA (0.6816) and nears daily cloud top.
RSIs deepen bear bias, thin cloud attract, techs growing more bearish. Support remain at last lows 0.6782 followed by 0.6766 (23.6% Fibonacci level).