Market Update 04/12/2024

The AUD/USD pair hovered around 0.6480 in recent trading. All eyes are on Australia’s Q3 2024 GDP data, set for release at 11:30 AM Sydney time. Economists project a 0.5% quarterly and 1.1% annual growth. A significant underperformance could potentially accelerate the RBA’s rate cut timeline, currently anticipated for May 2025, and subsequently impact the AUD/USD.

In the US, the dollar stabilised at approximately 106.2 points, with minimal movement in Treasury and equity markets. October’s JOLTS report revealed job openings slightly above expectations at 7.7 million, while the quit rate climbed to 2.1%. San Francisco Fed President Mary Daly expressed support for future rate cuts but remained noncommittal regarding the upcoming FOMC meeting. Market watchers await FOMC Chair Powell’s comments tomorrow for potential insights on a 25bp rate cut, an action currently given a 70% probability by futures markets. Additional economic data, including ADP employment and ISM services figures, are due for release.

The AUD/EUR recovered some ground, trading just below 0.6170. Political turbulence looms in France, with a no-confidence vote against Prime Minister Barnier’s government scheduled. Marine Le Pen’s National Rally party’s support for the motion increases the likelihood of governmental collapse. Emergency measures may be implemented to prevent a shutdown, but fiscal consolidation efforts are likely to face further delays. This situation could widen the spread between French and German 10-year bond yields, potentially weakening the EUR.

Overnight, the AUD/CNH consolidated around 4.7300. The USD/CNY is trading 1.2% above the PBoC’s latest fix, marking the widest gap since early August. This divergence suggests growing market resistance to the PBoC’s yuan support efforts. Analysts now project the USD/CNH to reach 7.70 by Q3 2025. Expectations are that the PBoC may allow yuan depreciation to mitigate the impact of potential US tariffs on Chinese exports, once officially announced.