A risk-averse mood prevailed, amid omicron concerns and a mixed US jobs report. The S&P500 fell (-0.8%), as did bond yields and risk-sensitive currencies. The US dollar index closed unchanged on the day. EUR fluctuated between 1.1267 and 1.1333. USD/JPY fell from 113.20 to 112.56 via 113.61. Underperformer AUD fell from 0.7080 to 0.6993 – a 13-month low. NZD fell from 0.6800 to 0.6741 – a 13-month low. AUD/NZD fell from 1.0420 to 1.0357.
US 2yr treasury yields fell from 0.63% to 0.58%, while the 10yr yield fell from 1.45% to 1.34%. Markets fully price the first Fed funds rate hike to be in July 2022. Australian 3yr government bond yields (futures) fell from 1.10% to 1.03%, while the 10yr yield fell from 1.66% to 1.55%. Markets fully price the first RBA rate hike to be in July 2022.
Commodities, Brent crude oil futures rose 0.6% to $70, copper fell 0.7%, gold rose 0.8%, and iron ore rose 1.2% to $101.
Overnight Currency Range
AUD/USD 0.6993 0.7095
EUR/USD 1.1267 1.1334
GBP/USD 1.3209 1.3311
USD/JPY 112.56 113.61
NZD/USD 0.6743 0.6818
USD/CAD 1.2743 1.2853
USD/CNH 6.3675 6.3800
AUD/JPY 78.75 80.37
AUD/NZD 1.0369 1.0419
A quiet start for the week on the data horizon with nothing on the calendar of note, leaving investors to remain focused on the potential impact of the Omicron variant which again weighed in Friday trade. Tomorrow’s RBA meeting is set to dominate local proceedings for the week ahead while the routine data dump from China may also have some impact on local markets. Offshore, investors will be focussed on Eurozone GDP and U.S inflation as well as the worrying ongoing spread on the Omicron strain.
AUD/USD made new lows of 0.6994 on Friday with limited technical support on the charts. Offering interest remains thick above 0.7100
Event Risk Data Today
Australia: The November MI inflation gauge is back at pre-pandemic levels. The staggered reopening of NSW and Vic is anticipated to see further strength in ANZ job ads in November.
NZ: August’s delta lockdowns will see temporary weakness in building work put in place in Q3 (f/c: -13.0%). ANZ commodity prices should reflect the firming of dairy prices over November.
EUR: December’s Sentix investor confidence survey will be impacted by omicron and delta concerns.