Markets Right now: Shocking buying statistics

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Yesterday’s retail numbers showed Australians are cutting back on their buying habits.

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Today’s podcast

Overview: Everyone loves Raymond

  • US stocks at record highs into the close, but bond yields also greater, supporting USD
  • AUD back beneath .69, getting earlier shrugged off poor retail trade information
  • Frydenberg in AFR says RBA two-three% Inflation target (and broader policy agreement) unchanged
  • RBA these days noticed unchanged at .75% US non-manufacturing ISM primary information draw tonight

US stocks continue to energy ahead

Phase 1 US-China trade deal optimism continuing to be trotted out as the justification. The S&ampP 500 is at the moment up .three% at three,076 half an hour just before the close, led by the rise of a lot more than three% in the power sector in conjunction with an earlier two%+ rise in crude oil rates, even though oil has offered back a great portion of these gains in the final hour or so of New York trade to be only 35-45 cents up on the day.

In contrast to the final 5 small business days exactly where good worldwide danger sentiment has been related with across-the board US dollar weakness, it has been the opposite overnight with the DXY dollar index up more than .three%. Losses variety from .1% for the Canadian dollar by means of to .six% for the Swedish and Norwegian Crowns.  Right here, we would point to a fresh rise in US Treasury bond yields as a supply of assistance for the dollar, whereas due to the fact final week’s FOMC meeting, bond yields have typically been falling alongside good danger sentiment, to stress the US dollar on two fronts.  USD/JPY has accordingly been lifted in conjunction with greater UST yields, had been 10-year Treasuries are at the moment 7.5bps greater at 1.784%. European bond yields earlier closed two-5bps greater.

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The upshot of the above for the Australian dollar

Is that getting left right here yesterday with a lot of chatter about AUD/USD seeking poised to test some quite substantial overhead technical resistance levels, the pair is back down beneath .69 close to exactly where it was just before the US dollar began promoting off soon after Fed Chair Jay Powell’s post FOMC press conference final Wednesday in which he produced clear that the bar to the Fed resuming lifting policy prices was extremely higher certainly.

Final evening, NAB revised its FX forecasts to reflect the view that China and the US would comprehensive this Phase 1 deal in coming weeks, whereupon one particular of the upshots would be a willingness by China to guarantee that the USD/CNY price not be permitted to rise above its earlier highs just shy of 7.20, a lot more probably then trading in a relatively narrow variety just above 7.00 for the most portion, unless or till there is agreement to wind back some or all current US tariffs on Chinese imports. The latter is not some thing we count on to happen anytime quickly. This in turn is now noticed limiting the danger that AUD/USD, which has been so very correlated with the CNY of late, will make new lows this year beneath its early October post-GFC low about .6670. The new forecasts see AUD/USD at .69 at year finish, but not noticed breaking sustainably back above .70 by means of H1 2020 at least.

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Yesterday, the AUD suffered only temporarily from an additional poor set of neighborhood retail sales figures. Retail volumes fell by .1% in Q3, nicely beneath marketplace (.three%) and NAB expectations (+.two%) and September nominal sales had been up by just .two% but aided by a strong boost in retail rates.  Retail volumes have now recorded falls of .1% in 3 of the previous 4 quarters to be .two% decrease than a year ago. By way of comparison, the final time volumes fell on an annual basis was the .six% decline noticed in the early 1990s recession.  These information are a worrying sign that general customer spending development was weak in Q3 in spite of assistance from the $7.2b of earnings tax refunds that began flowing from July and the RBA price cuts in June and July. This suggests that the underlying trend for the customer may possibly have deteriorated, whereas the RBA expects a gradual improvement to assistance a “gentle turning point” in the economy. Let’s see what the RBA has to say about this in today’s post-Board meeting Statement, which could possibly flag prospective forecast revisions to be incorporated in this coming Friday’s Statement on Monetary Policy.

As for the Statement on the Conduct of Monetary Policy anticipated to be published later these days and about which there has been considerably speculation due to the fact the weekend, Treasurer John Frydenberg has pre-empted the release of the Statement writing an op-ed piece in the AFR, saying there is no adjust to the inflation target. The Treasurer seems to have blinked on his earlier push to introduce BoE-style accountability measures, saying, “Not altering the statement delivers continuity and consistency at this time of worldwide financial uncertainty”.

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Lastly

Incoming ECB President Christine Lagarde has just produced her inaugural speech, but does not provide any direct comments on monetary policy considering.

Coming up

The RBA’s most recent choice at two:30 AEST is extensively anticipated to be a ‘no change’ as the Board decided to sit out a lot more information and facts on the influence of this year’s 75bps worth of money price reductions just before deciding what if something to do subsequent. Assuming so, interest will be any guidance the Statement delivers on prospective alterations to the financial forecast to be published in Friday’s Statement on Monetary Policy.

On the information front, the highlights are the Caixin Solutions and Composite PMIs at 12:45 AEDT and tonight the Non-Manufacturing ISM, the latter noticed up to 53.five from 52.six. US trade numbers and UK solutions PMIs also function.

As for the Melbourne Cup, I know considerably much less about horses than I do about economic markets (a quite low bar some could possibly say) but skimming the runners and riders on my way in, struggled to appear previous my namesake Raymond Tusk (albeit, at least till my colleagues walked in the door just now getting listened to our every day Podcast (hyperlink beneath) only my mother calls me Raymond).

Marketplace rates

For additional FX, Interest price and Commodities information and facts take a look at nab.com.au/nabfinancialmarkets