US equities fell, as familiar concerns such as stagflation and higher interest rates resurface. The S&P500 is down 1.4% and at a fresh two-month low. The risk-averse mood didn’t extend to currencies and bonds, though, the US dollar underperforming and bonds contained. US 2yr treasury yields rose from 0.26% to 0.28%, while the 10yr yield ranged between 1.46% and 1.51%. Commodities, Brent crude oil futures rose 2.5% to $81 – a three-year high, copper rose 1.1%, and gold rose 0.3%
Overnight Currency Range
AUD/USD 0.7250 0.7304
EUR/USD 1.1588 1.1640
GBP/USD 1.3532 1.3640
USD/JPY 110.82 111.30
NZD/USD 0.6927 0.6981
USD/CAD 1.2558 1.2655
USD/CNH 6.4415 6.4584
AUD/JPY 80.41 81.17
AUD/NZD 1.0436 1.0486
The RBA will meet later today and the market expects that its policy stance won’t change after announcing an extension and tapering of its Bond Purchase Program last month. With the US Fed creeping closer to formally signalling a 2022 liftoff, the RBA has been clear to distance itself from this slippage and is sticking firmly to its ‘nothing until 2024’ message – a message financial markets have largely been ignoring.
AUD/USD traded in a 0.7250/.73045 range overnight with offering interest still expected ahead of 0.7320 while 0.7130 should provide meaningful support in the near term.
Event Risk Data Today
Australia: Markets are expecting the stance of policy will subsequently be left unchanged by the RBA at its October meeting. The market forecasting the August trade balance to narrow to $10.3 billion on lower iron ore prices. Finally, while vacancies remain at record highs, lockdowns should affect September ANZ jobs ads.
New Zealand: The Q3 QSBO business opinion survey is likely to see a sharp drop in current conditions due to lockdowns. September ANZ commodity prices should meanwhile firm on elevated meat and dairy prices over the month.
Japan: The September CPI is expected to show delta continuing to act as a headwind for recovery (market f/c: -0.1%yr).
US: The trade deficit should remain wide in August on imports to meet consumer demand (market f/c: -$70.6bn). Finally, the September ISM non-manufacturing index is likely to be influenced by delta pressures but also consumer spending rotating to services (market f/c: 59.9).