The strong US data released overnight saw a partial reversal of yesterday’s weakness in equity markets. S&P was trading +1.5% in late trade while the NASDAQ was 1.6% higher. S&P 500 is still 3.5% lower over the course of the week with further volatility expected as we approach next week’s US Presidential elections. Commodities, Brent crude oil futures fell 3.6% to $37.70 – a five-month low, copper rose 0.1%, iron ore fell 0.6% to $115.90, and gold fell 0.4%.
AUD/USD: 0.7003 – 0.7076 (a three-month low)
EUR/USD: 1.1650 – 1.1757 (one-month low), dovish ECB signals weighing
GBP/USD: 1.2882 – 1.3025
USD/JPY: 104.03 – 104.71
USD/CAD: 1.3279 – 1.3390
NZD/USD: 0.6597 – 0.6660
AUD/JPY: 73.10 – 73.85
AUD/NZD: 1.0600 – 1.0629 (a four-month low)
The AUD is testing support levels attempting to breaking below 0.70, under pressure ahead of the key events next week (RBA, US elections). The market sees risks of a break of 0.7000/10 support pre-election but scope for a sharp rebound if equities recover. Broad based USD strength pushed the AUD/USD to a low of 0.7003 with the next level of support resting at 0.7000 while offering interest has grown and lies ahead of 0.7060 and again at 0.7140.
Event Risk Data Today
Australia: Private sector credit is contracting and there is prospect for further falls as Covid’s economic shock reduces the appetite for debt. Market expects the weakness in business and personal credit to continue, whilst housing credit grows modestly (total private credit: market f/c: 0.1%). The Q3 PPI will follow; higher fuel costs are expected to be offset by a stronger AUD and soft demand (prior: -1.2%). Also, the result of the 2019-20 annual re-benchmarking of the national accounts will be released.
China: manufacturing PMI
NZ: Consumer confidence should reflect lingering uncertainty for NZ households (prior: 100).
Japan: Lower food and energy prices are expected to weigh on the Oct CPI (prior: 0.2%/yr, market f/c: -0.2%/yr).
Euro Area: GDP had its largest contraction on record of -11.8% in Q2. The unwinding of strict containment measures in May and June point to a rebound in Q3 (market f/c: +9.6%). But, with cases surging once again, risks are to the downside for both Oct’s CPI (prior and market f/c: 0.1%) and September unemployment (prior: 8.1%, market f/c: 8.3%).
US: Personal income growth should flatten at an expected 0.3% as unemployment aid rolls off, whilst personal spending continues to be supported by food and healthcare spending (prior and market f/c: 0.1%). The Q3 employment cost index is likely to reflect substantial labour market slack, with wage growth expected to moderate to 0.5%. Elevated virus counts and a lack of fiscal relief will challenge the recovery in Uni of Michigan sentiment too(prior and market f/c: 81.2).