OVERNIGHT DATA AND HEADLINES
• The USD slid and global equity markets faltered as investors dismissed solid economic data and again fretted about the likelihood of a "phase one" trade deal before a new round of U.S. tariffs on Chinese imports begins in 10 days.
• German industrial orders fell unexpectedly and retail sales in the euro zone fell at their sharpest rate this year in October. Overall, the euro zone economy grew at a modest pace in the third quarter.
• The U.S. trade deficit dropped to its lowest level in nearly 1-1/2 years in October. The trade deficit tumbled 7.6% to $47.2 billion, the smallest since May 2018, as both imports and exports of goods declined. It was the second straight monthly drop in the trade bill and the percent drop was the biggest since January. The decreases in imports and exports suggested the White House's "America First" agenda, marked by a 17-month trade war with China, was reducing trade flows, which in the long run is detrimental to domestic and global growth. The goods trade deficit with China fell 1.1% to $31.3 billion, with imports unchanged and exports increasing 3.4%. The goods trade gap with the European Union jumped 20% to $16.4 billion, with imports surging to a record high.
• U.S. weekly jobless claims drop to seven-month low - the number of Americans filing applications for unemployment benefits unexpectedly fell last week. Initial claims for state unemployment benefits dropped 10,000 to a seasonally adjusted 203,000 for the week ended Nov. 30, the lowest level since mid-April, the Labour Department said on Thursday.
• U.S. stocks were up - Dow Jones down +0.09% at 27,675, S&P 500 +0.13% at 3,117 and Nasdaq +0.06% at 8,571.
• The USD fell for a fifth straight session, undermined by weaker-than-expected U.S. economic data and this week's robust EUR & GBP performance. DXY lower 0.23% at 97.43.
• CNY inched lower, giving back some of the late previous session's gains. CNY opened at 7.0535, traded to 7.0350 and ended back up at 7.0445.
• EUR and GBP both stronger overnight – EUR finding a 1.1108 high (from 1.1075) and GBP gaining 0.37% to fresh 1.3164 highs. GBP has gained more than 1.5% this week as the ruling Conservative Party will likely win a majority in next week's election and end 3-1/2 years of Brexit-related uncertainty by taking Britain out of the European Union.
• AUD hit a minor speed bump at 0.6855 highs as yet more domestic data undershot expectations, though it still managed to hold some decent gains. AUD sold down to 0.6818 but ended around 0.6835.
• NZD sold down towards 0.6520 lows but late NY saw a bounce up to 0.6550.
• AUDNZD was unable to gain any further traction, selling back down towards 1.0425 lows from 1.0475.
• AUDEUR also lower, trading down from 0.6175 towards 0.6145 lows.
• U.S. Treasury yields rose as a range of reports indicated continued economic growth, then pared the gains in afternoon trading.
• The benchmark 10-year yield was 2 basis points higher at 1.799%, reflecting increased investor appetite for risk, after rising as much as 4.1 basis points in the morning.
• The two-year yield was up less than a basis point to 1.5863%.
• German 10-year bond yields rose slightly more than 2 basis points to -0.293%.
• Gold edged higher as uncertainty emerged from mixed messages on the U.S-China trade negotiations. Spot gold was up 0.12% at $1,476 per ounce, having hit its highest since Nov. 7 at $1,484 the previous day.
• Benchmark spot 62% iron ore for delivery to China gained 0.6% to $90 a tonne.
• Copper prices steadied as the market waited for developments on the U.S.-China trade dispute. LME copper ended little changed at $5,889 a tonne.
• Oil prices rose on expectations OPEC will deepen production cuts in an effort to prop up prices. Brent crude futures rose 39 cents to $63.39 a barrel. U.S. crude rose 0.27% to $58.59 a barrel.
EVENT RISK TODAY
• Australian Economic data today : Nov AiG PCI (Construction in cyclical downturn – led by home building)
• U.S. - November non–farm payrolls (last 128k, market f/cast 190k). GM workers return to see payrolls bounce in Nov
• U.S. - Nov unemployment rate (last 3.6%, market f/cast 3.6%). The unemployment rate to remain unchanged
• U.S. - Nov average hourly earnings (last 3.0%, market f/cast 3.0%). Wages growth to remain unchanged.
• U.S. - Oct wholesale inventories 0.2% – Likely to be a drag on growth hence.
• Dec Uni. of Michigan sentiment 96.8 97.0 – Still above average, albeit off highs.
AUD staged a valiant effort overnight, holding much of this weeks recent gains following yesterday’s flat domestic retail sales and exports skidding lower 5% as the trade surplus fell to A$4.5 bln.
Australian retailers had it tough in October as skittish consumers chose to hoard any windfall from lower interest rates and tax rebates, likely heralding another quarter of disappointment for the economy.
Clothing, home wares and department stores all saw declines in the month. The sector had already suffered its worst 12-month stretch since the 1991 recession as shoppers struggled with stagnant
wages and sky-high debt. Futures are fully priced for a rate cut to 0.5% by April with a real chance of a move to 0.25% by late 2020.
AUD opens this morning down 0.25% at 0.6830 – AUD lower against all the majors. USD moved lower against all the majors except the AUD despite better US data.
No major Australian today releases today – spot light will be on the U.S. tonight with the release of November non-farm payrolls (last 128k, market expecting 190k).
AUD longs need help from trade talks. AU October retail sales are downbeat, trade surplus shrinks. Data results weigh on short-term AU rates, ups chance of RBA cut.
AUD below the daily cloud top, nears Dec. 4 low & 21 daily moving average (0.6815). For now, AUD remains above the level.
Support region in between 0.6805/0.6815, Resistance 0.6875 (50% Fibonacci level).
RSI’s slowly turning – awaiting further 24-48 hour confirmation.