Risk-seeking resumed, the S&P500 up 1.5% to a fresh record high. The defensive US dollar fell, and bond yields rose. Optimism in the US about a reopening of negotiations towards a bipartisan Covid support package gained force as Mnuchin and Pelosi scheduled a call. Further, Senator Manchin (Dem) announced, “…a bipartisan, bicameral framework for a Covid-19 relief package. This proposal would direct more than $900bn to help small business, healthcare providers, and unemployed Americans who need help now. It’s time to put politics aside & do what’s best for our country”.
There was also optimism over reported comments that negotiations for a “UK-EU trade deal have entered the ‘tunnel’”. Although UK officials did not respond, EU officials suggested that it was an appropriate assessment.
Commodities, Brent crude oil futures fell 1.1% to $47.35, copper rose 2.0% to an eight-year high, iron ore rose 0.6% to $132.85 – a seven-year high, and gold rose 2.1%. The bi-monthly GDT dairy auction resulted in prices overall rising 4.3%, with whole milk powder up 5.0% - close to yesterday’s futures market predictions.
AUD/USD: 0.7342 – 0.7372
EUR/USD: 1.1954 – 1.2055 (a three-year high)
GBP/USD: 1.3316 – 1.3442
USD/JPY: 104.19 – 104.58
USD/CAD: 1.2942 – 1.2981
NZD/USD: 0.7027 – 0.7067 (the highest since April 2018)
AUD/JPY: 76.61 – 76.93
AUD/NZD: 1.0419 – 1.0474 (an eight-month low)
AUD/USD remains supported above the key 0.7340 level, which was the 9 and 17 November highs, as well as Monday’s low. That implies that the path of least resistance lies to the upside, meaning a gradual grind higher back towards recent highs just above 0.7400 is likely. However, if the 0.7340 level does go, this would open the door to a move back towards the 0.7300 level and then the pair’s 21-day moving average around 0.7287.
Event Risk Data Today
Australia: The COVID pandemic triggered a severe recession over the first half of 2020 - with output a -0.3% for Q1 and a -7.0% for Q2. The second half of the year sees the virus under control locally (but only after a 2nd lock-down in Victoria) and restrictions being reversed. The market expects that Q3 GDP to expand by 3.0% (-3.9%yr). At 10:00 am AEDT, RBA Governor Lowe will appear before the House of Representatives Standing Committee on Economics.
New Zealand: The Q3 terms of trade are expected to fall 4.0% on temporary export price weakness. RBNZ Governor Orr will speak via Zoom to an invitation by the Australian National University in Canberra, the speech to be published on the RBNZ website at 7:30pm NZT.
Euro Area: The October unemployment rate is expected to rise a notch as the labour market continues its softening trend (market f/c: 8.4%).
US: Market is looking for a print of 430k in the November update of ADP employment – initial claims point to downside risks. The Federal Reserve’s Beige Book will provide a snapshot of conditions across the Fed districts; the employment gains highlighted in the September publication may begin to unwind. Finally, Fed Chair Powell (02:00 AEDT) and the FOMC’s Williams (05:00 AEDT) will speak.