October 22, 2015

Markets Today: A slight reversal of fortune

Not a massive night for currency markets and markets in general, though with risk-off tinges; stocks were flat in Europe and softer into the US close.

Not a massive night for currency markets and markets in general, though with risk-off tinges; stocks were flat in Europe and softer into the US close. The US dollar in somewhat stronger this morning, though most against the commodity/oil currencies, the Canadian loonie come in for the most selling, down around 1%, with the $A long for the ride, down 0.66%, not helped by yesterday’s over 3% decline in Chinese equities.

A growth downgrade from the Bank of Canada, and a further decline in oil prices overnight from a larger than expected rise in weekly US oil inventories were both headwinds for the C$. Expected rate inaction from the Bank of Canada transpired, but it was their downgrade to growth from the continued weakness in oil prices saw some C$ weakness, the BoC now expecting growth of 2% next year (down from 2.3%) with soft oil prices cutting further into capital spending and growth. The BOC cut ¾% off next year’s growth to 2%, up from just 1% this year.

The appetite the Aussie dollar was also trimmed, and despite supportive comments yesterday from Federal Treasury Secretary John Fraser appearing before a Senate committee hearing. He related more upbeat recent news about the domestic economy from more positive business feedback on business conditions, an indication he wouldn’t be voting for a RBA rate cut anytime soon on domestic economic grounds. To quote Fraser: “my own feeling, to be honest, is that things have been picking up somewhat. It’s been happening for the last couple months or so” he said, continuing that “I can’t put a figure on it, it’s just I don’t get beat up like I did when I first came into the job.” It’s in the last two or three months or so. It’s not just big business, it’s tradies, all sorts of businesses.”

Coming up

This morning there’s a speech from the RBA’s Malcolm Edey (Assistant Governor, Financial System), speaking to the International Swaps and Derivative Association’s 2015 annual conference in Sydney at 9.30. No speech title is available but could be less market sensitive. The theme of the conference is a retrospective on the past five years since the passage of the Dodd–Frank Act. Before Edey’s speech, (0800) is NZ ANZ Job Advertisements for September.

Later in the morning we have the September quarter NAB business survey, this one polled at the same time as the August month survey. While the actual reading on business confidence will get some initial wire coverage (it’s a larger sample of the August monthly survey), there should be more interest in what the survey says about 12-months-ahead capital expenditure plans and employment expectations. Mid-afternoon at 3.30, the RBA annual report is being released. It’s very much a “year-in-review document rather than a vehicle for expressing the bank’s monetary policy outlook, though there may be some comments it’s a press/wire coverage of course.

Tonight kicks off with a French business survey for October is and the BoE’s Cunliffe is speaking at an event in London. UK retail sales for September are due, with pretty solid growth of 0.4% expected both for headline and underlying series (excluding auto fuel). On the policy front the ECB is expected to leave rates unchanged and the meeting outcome should be relatively uneventful. As always though, the market will be alert to the possibility if not probability of any policy leaning surprise from ECB President Draghi on the QE front.

In the US, weekly jobless claims are expected to tick back up 10k to 265K, the Chicago Fed’s national activity index for September is released, there is Canadian retail sales data, along with US government-compiled FHFA house prices for August. EC Consumer Confidence is also out, together with US Existing home sales, the US Leading index, and Kansas City fed manufacturing. The BOE’s Bailey is speaking at an event in London later tonight, at 6:30 AEDT tomorrow morning.


Stocks square; oil lower: Eurostoxx 600 -0.0%, Dax +0.9%, CAC +0.5%, FTSE +0.1%. Dow -49 points to 17,169, -0.3%, S&P 500 -0.3%, Nasdaq -0.8%, VIX 16.66 +5.8%. Shanghai -3.1%, Mumbai -3.1%, Nikkei 225 -0.8% and ASX 200 +0.2%; ASX SPI futures this morning -0.7%. US bond yields: 2s at 0.63% (0), 10s at 2.03% (-4). WTI oil at $45.16 (-2.4%), Brent at $47.83 (-1.8%), Malaysian Tapis (yesterday) $47.39 (-0.4%). Gold at $1166.80/oz (-0.9%). Base metals: LME copper -0.5%, nickel -1.2%, aluminium -1.9%. Iron ore $52.8/t -0.3% Chinese steel rebar futures +0.8%. Soft commodities spot futures: wheat +0.6%, sugar +0.9%, cotton +0.7%, coffee -3.0%. Euro Dec 14 CO2 emissions at €8.45/t (-0.2%). The AUD/USD’s range overnight 0.7202-0.7234; indicative range today 0.7175-0.7230; the AUD/USD is 0.7211 now

The Bank of Canada left rates steady but cut its growth outlook from lower oil prices

For full analysis, download report:

Markets Today: 22 October 2015 (PDF, 325KB)

For further FX, Interest rate and Commodities information visit nab.com.au/nabfinancialmarkets


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