The overnight session was neither strongly risk-on nor risk-off; the AUD has been testing higher levels overnight with the big dollar sold lower during the US session.  The AUD’s retracement lower yesterday has proved for now at least to be short-lived.  NAB’s new rate call of two more rate cuts and the possibility down the track of unconventional monetary policy saw selling continue yesterday, but it’s all been reversed overnight.

Chinese consumer and producer inflation for July came and went without any market fanfare, deflation of producer prices cooling (less negative) to -1.7% from -2.6%; the market was expecting -2.0%, a slower rate of commodity/purchased price declines evident pretty much across the board.  It’s no coincidence for example that Chinese spot iron ore prices are now on a par with year earlier levels.  (That’s less deflation risk in China; more growth/income upside for the Australian economy.)

Yesterday’s dip in the AUD was turned around in the London session, buying re-emerging during a good session for European equities that saw the Eurostoxx 600 index up 0.92% and European banks by 1.13%.  The AUD/USD has traded to an intra-day high of 0.7680/85 and still holds close to that level this morning during a session that saw US equities close flat to ever so modestly higher, the Nasdaq to the better, closing up 0.24%.  The VIX index has likewise closed little changed, still low at 11.66.

Sterling remained generally soft, continuing to trade below 1.30 toward a low testing 1.2960 overnight, before making a modest recovery this morning back to 1.30, benefitting as did other majors as the USD ran out of steam.  UK industrial and manufacturing production for June were in line with expectations, though the June UK trade report revealed a larger than expected deficit, coupled with a large adverse revision to May.  Neither report on the pre-Brexit economy had any lasting fallout on Sterling.

US data was also inconsequential, NFIB Small Business Optimism revealing no change, small business reporting no step up or down in actual compensation or plans.  After the US wholesale inventories and sales report for June, the Atlanta Fed’s GDPNow estimate for Q3 GDP (at this early stage) was shaved to 3.7% from 3.8%.

Coming up

The big event to watch today will be Glenn Stevens’ speech to the Anika Foundation, his last speech as Governor of the RBA after 10 years of service as Governor, before that Deputy Governor since 2001, having joined the Bank’s Research Department in 1980.  There’s no title as yet for his speech that has a scheduled 1.05pm start time.  You wouldn’t be surprised if it was more reflective in nature, but there’s always the possibility for Q&A given the freshness of last week’s rate cut and quarterly Statement.

Data for the local session today includes REINZ House Sales for July at 8.00am, Japanese machine orders to 9.50, then for Australia, the monthly Westpac-Melbourne Institute Consumer Sentiment index at 10.30 (rate cut impact, it’s generally positive); interestingly, yesterday’s weekly consumer confidence lost some traction, if still high and back to levels of only three weeks ago.  Then there’s housing finance approvals for June at 11.30 with likely more interest in the investment lending values, that rose 3.9% last month in a flattening trend.  Japan Tertiary Industry Index is out at 2.30pm AEST.

Tonight is relatively quiet for key data.  There’ll be much more interest in not only the RBNZ rate announcement at 7.00am tomorrow morning, but the response of the Kiwi.  A cut of 25bps is well and truly baked into the cake with a cut virtually fully priced in and the market sniffing an outside chance of a 50bps cut, priced at around a 10% chance.

Overnight

On global stock markets, the S&P 500 was +0.17%. Bond markets saw US 10-years -1.56bp to 1.57%. In commodities, Brent crude oil +0.53% to $45.63, gold+0.3% to $1,346, iron ore flat at $61.56. AUD is at 0.7669 and the range since yesterday 5pm Sydney time is 0.7635 to 0.7671.

Good luck.

For full analysis, download report:

•  Markets Today:  10 August 2016 (PDF, 107kb)

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