3rd December 2021 - Main event for the week Non Farm Payrolls will be the focus for markets today

Market Headlines

US equities rose, as dip-buyers again emerged. The S&P500 is up 1.5%, and bond yields are slightly higher, while the AUD and NZD are little changed. The US dollar index is up 0.1% on the day. EUR ranged sideways between 1.1310 and 1.1348 before falling to 1.1296. USD/JPY ranged between 112.66 and 113.33. AUD ranged between 0.7085 and 0.7115. NZD ranged between 0.6799 and 0.6831. AUD/NZD slipped from 1.0440 to 1.0408.

US 2yr treasury yields rose from 0.58% to 0.63%, while the 10yr yield rose from 1.41% to 1.46%. Markets fully price the first Fed funds rate hike to be in July 2022. Australian 3yr government bond yields (futures) rose from 1.09% to 1.14%, while the 10yr yield ranged between 1.63% and 1.72%. Markets fully price the first RBA rate hike to be in July 2022.

Commodities, Brent crude oil futures rose 0.9% to $69, copper rose 1.1%, gold fell 1.1%, and iron ore fell 2.5% to $100.

Overnight Currency Range

AUD/USD 0.7084 0.7119

EUR/USD 1.1296 1.1347

GBP/USD 1.3267 1.3332

USD/JPY 112.63 113.33

NZD/USD 0.6799 0.6831

USD/CAD 1.2779 1.2838

USD/CNH 6.3687 6.3773

AUD/JPY 79.88 80.56

AUD/NZD 1.0410 1.0439

AUD Thoughts

This week’s main event is up is with the US employment report due to be released this evening. Markets expect November will likely show another strong month of payroll gains, reflecting continued labour market momentum. AUD/USD traded in a 0.7084/0.7119 range overnight with a quiet session expected ahead of tonight's Non-Farm Payrolls. Demand remains ahead of 0.7050 while offering interest is staggered above 0.7150.

Event Risk Data Today

Japan: The final release of the November Nikkei services PMI should reflect the sector’s recent improvement as delta risks subside.

China: November’s Caixin services PMI is expected to report robust growth, although restrictions to halt delta present as downside risks.

Eur/UK: The final release of the November Markit services PMI is also due for Europe and the UK. Europe’s retail sales are set to lift in October as demand evens out between goods and services (market f/c: 0.3%).

US: November’s Non-Farm Payrolls are expected to reflect the robust momentum in the economy (F/C 550k) which should also see the unemployment rate edge lower (market f/c: 4.5%). Average hourly earnings growth is expected to remain strong given the limitations on labour supply (market f/c: 0.4%). November’s ISM and Markit services PMIs should continue to signal strong growth in the services sector despite delta. The FOMC’s Bullard is due to speak at the Missouri Bankers Association.

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