7th October 2020 - AUD/USD plummets towards 0.7100 on risk-off takes over


Good Morning,

Market Headlines

US equity markets dropper after Trump’s announcement that “I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business”. The S&P500 is down 1.4%; US 10yr yields fell 4bps and the A$ fell to 0.7110. Tech stocks were hit hard with Amazon -3%; Apple down 2.6% and Facebook -1.8%.

Commodities: Crude oil pared sharp gains after Trump’s relief talks being cancelled news saw gains of up to 4% halved with Nov WTI USD40.11bbl, Dec Brent USD42.14/bbl. Gold fell 1.3% on the Trump news, last at USD1889/oz whilst Silver unwound yesterday’s gains, falling -4% to USD23.38/oz

The AU Budget was by in large well received, though the impact on AUD was minimal given that the main features and forecasts were very much in line with market estimates and media reporting.

Currency

AUD/USD: 0.7110 – 0.7174

EUR/USD: 1.1736 – 1.1807

GBP/USD: 1.2887 – 1.3007

USD/JPY: 105.48 – 105.78

USD/CAD: 1.3244 – 1.3316

NZD/USD: 0.6587 – 0.6655

AUD/JPY: 75.05 – 75.80

AUD/NZD: 1.0761 – 1.0798

AUD Thoughts

AUD/USD plummets towards 0.7100 on risk-off takes over, weighed by equities and gold, all collapsing after US President Trump cancelled stimulus negotiations until after the elections.

A potentially busier day is expected ahead as the market continues to digest the overnight news that fiscal stimulus negotiations in the US have been put on hold until after the election. The US FOMC Minutes will also be closely early tomorrow morning.

Event Risk Data Today

Australia: Weekly payrolls to 19 Sep will be released. The 0.4% fall in payrolls in the fortnight prior highlights the significant headwinds Australia’s labour market faces.

China: Foreign reserves for Sept are expected to consolidate after a fourth consecutive monthly rise in August (prior: 3164bn, market f/c: 3154bn).

Singapore: Q3 GDP is expected to bounce strongly following an annualised 42.9% quarter on quarter decline in Q2 (prior: -13.2%yr, market f/c: -7.2%yr).

Germany: Industrial production remains nearly 11% below pre-pandemic levels. Recovery will be slow (market f/c: 1.0%).

United States: The Sep FOMC Minutes will be assessed for detail on forward guidance and the new policy framework as well as the Committee’s view of the risks. The FOMC’s Rosengren, Bostic, Kashkari (04:00 AEST), and Williams (05:00 AEST) will also speak.

The first US Vice Presidential debate from Salt Lake City is scheduled to begin at 14:00 AEST Wednesday afternoon.

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