2nd March 2021 - Another busy day ahead beginning with RBA

Good Morning,

Market Headlines

Equity markets bounced back, the S&P500 currently up 2.2% after the US House of Representatives passed US President Joe Biden’s stimulus bill. Democrats hope to have it finished by March 14, when the current stimulus expires. The number of global new contagions increased last week for the first time in almost two months. Meanwhile, experts suspect the Brazilian strain could evade natural immunity, rising all the alarms. The world continues vaccine immunization at an uneven pace.

Commodities, Brent crude oil futures fell 1.0% to $63.80, copper fell 0.4%, iron ore fell 0.9% to $174.65, and gold fell 0.6%.

AUD Thoughts

Busy day ahead markets closely watching Governor Lowe’s comments following today’s RBA Board meeting. Comments particularly around bond markets and the Bank’s 3-year target (yield curve control) that will be closely watched after the Bank stepped in to ‘defend’ its 0.10% target this week with $7b of bond purchases.

Eurozone CPI will likely continue to be buffeted by transitory factors and statistical mechanisms which disguise the true underlying weak price growth.

AUD/USD was well supported yesterday and after trading as low as 0.7706 just after the open, the local unit rallied to a high of 0.7787 during the us trading session. Demand is expected to emerge should we dip toward 0.7700 while topside resistance is expected ahead of 0.7820.

Overnight Currency Ranges

AUD/USD 0.76925 0.7883

EUR/USD 1.2140 1.22435

GBP/USD 1.4001 1.4182

USD/JPY 105.84 106.40 (6 month high)

NZD/USD 0.7370 0.7463

USD/CAD 1.2468 1.2590

USD/CNH 6.4444 6.4975

AUD/JPY 83.54 84.92

AUD/NZD 1.0680 1.0741

Event Risk Data Today

Australia: A big retracement clearly looms for dwelling approvals, with a further step down likely once the Homebuilder scheme expires altogether at the end of March. Markets expect total dwelling approvals to record a sharp 8% decline in January. The markets expects that net exports will subtract 0.4ppt from growth in Q4. Goods imports have roared back as the domestic economy reopens, while exports have been somewhat disappointing, in part due to weak global demand for energy (LNG and coal). The December quarter will be the 7th consecutive current account surplus(f/c $13.1bn). This run will hold the joint record for the longest string of quarterly surpluses in the history of the series. RBA is expected no changes to the policy settings at the March Board meeting.

New Zealand: Weekly snapshots from Stats NZ suggest some pullback in the January employment indicator. Markets expect the Q4 terms of trade to print a modest 1.0% rise on weaker import prices.

Euro Area: The February CPI is set to hold around 0.9%yr.

US: The FOMC's Brainard (05:00 AEDT) and Daly (06:00 AEDT) will speak.

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